1

Intellectual Property BasicsPeggy Wade, Ph.D.Director, Division of Engineering Research3428 Engineering BuildingMichigan State University517-353-9492E-mail: wadem@egr.msu.eduhttp://www.egr.msu.edu/egr/research/techtransfer.php

11-4-2005

2

Introduction

What is intellectual property? Why do we want to protect it? How do we protect it? How do we transfer the technology

to the public?

3

What is intellectual property?

Intellectual properties are intangible products of the mind. These include: inventions (devices, compositions, plants,

designs) publications videotapes computer programs works of art.

They must be reduced to a tangible form in order to be protected.

4

Why do we want to protect and license IP? It is very difficult to license technology

that is not protected. Makes the technology available to the

public and provides opportunities for graduates and recognition to faculty.

IP is a marketable commodity that can be used to leverage additional research dollars and income to support the inventors and the university, and help in the formation of new companies and jobs.

5

Statistics from Association of University Technology Managers (AUTM) Since 1998, over 2200 new products

have been introduced in the market place.

In 2003 in the U.S. and Canada (AUTM Survey Data, ~200 Universities): Over 15,500 Invention Disclosures, 4500

new Licenses 7921 patent applications were filed; 3933

new patents issued 374 new companies formed; 2279 start-ups

still operating. License revenue was over $1,310,000,000

6

How do we protect intellectual property? Copyrights Trademark Trade Secret Plant Variety Certification Patents

7

Office of Intellectual Property

Handles all patents and trademarks for MSU.

Engineering rep - Brad Shaw 355-2186

http://www.msu.edu/unit/oip/ Brochures noting MSU policies

http://www.msu.edu/unit/oip/brochuresandforms.html

8

Office of the Assoc. Vice Pres. forResearch and Graduate Studies

Handles all copyrights for the university.

Lori Hudson : ljh@msu.edu; 355-2186

http://www.msu.edu/unit/facrecds/FacHand/develpinstruct.html

9

Copyrights Documents, art, music, motion pictures,

software, etc. are automatically copyrighted when the document is created.

Can register the copyright with the government for $30.00. Must be registered before filing any infringement lawsuits.®

Lasts the life of the author plus 70 years Or lasts 95 years from publication or 120 years

from creation, if it was a work for hire MSU Policy and FAQ

http://www.msu.edu/unit/oip/LEED/copyhand02.pdf

US Copyright Website http://www.loc.gov/copyright/

10

Trademarks

Used to protect a symbol or phrase that’s identified with a product (e.g. Coca-Cola, Gatorade, Xerox). ™

Registration costs $325 but is not required except for federal court proceedings and for foreign protection; last for 10 years and is renewable indefinitely®.

Becomes effective when begin selling commercially.

http://www.uspto.gov/main/trademarks.htm

11

Trade Secrets

Specialized knowledge that can include data, formulas, compilations, programs, etc. which are maintained as a secret

Can be used where patents may not have a long enough term or be possible.

Trade secrets are kept under lock and key, with restricted access and publications.

Example - Coca-cola formula

12

Plant Variety Certification

Used for plants that reproduce sexually making it illegal to sell and propagate them commercially.

Certification protection is for 5 years and costs ~$2500.

13

Patents

Used for inventions, processes, machines, improvements, and composition of matter.

Not possible to patent scientific principles, methods of doing business or most naturally occurring articles.

Software algorithms can often be patented, but typically software is protected under copyright.

14

Three Patent Requirements Novel - new to the patent literature,

not published or described in an enabling manner. Time limit of one year from public disclosure to file a U.S. patent. Foreign patents must be filed BEFORE any public disclosure.

Utility - must be useful Non-obvious to one skilled in the art.

15

Types of Patents Utility – how something works or is

used; multiple claims Design – how something looks; only one

claim Provisional – establishes a filing date

and provide 1 year to file a full patent application with claims

Plant – for asexually reproducing a new plant; one claim

16

Differences between International & US Patents

US – First to Invent Most International – First to File

Very important to file protection before publicly disclosing to preserve foreign patent rights

Foreign protection very important to most companies

Provisional Patents have great use here

17

What does Patent Protection Provide? The right to EXCLUDE others from

making, using, selling of offering to sell the claimed invention during the patent term.

Must be marked as ‘patented’, or can’t recover from anyone who infringes on it.

Patent term typically = 20 years from date of filingDesign patent = 14 years

18

Bayh-Dole Act (1980) The Bayh-Dole Act was intended to

promote investment by the private sector in the commercialization of discoveries made using research funds provided by the federal government.

Prior to the Act, the government retained title to these inventions, and because it was cumbersome to get a license, few technologies were licensed and commercialized.

19

MSU Policy

MSU owns all intellectual property created by its employees using university equipment and supplies.

Students (unpaid) own their intellectual property.

Patents, copyrights, and trademarks are handled by Office of Intellectual Property and Assoc. VP for Research and Grad. Studies.

20

If you invent while at MSU…

Student Inventor

Student Inventsnot an MSU employee

i.e. part of a course, works in an unrelated campus job

Student Inventswhile an MSU employee

i.e. paid in a labon a research grant

Student pays for patent expensesfiles patent, receives 100% royalties

Student must develop, market, license or selltechnology

MSU pays for patentsshares royalties (~33%)

licenses and marketstechnology

U.S. patent costs~$10-15K takes ~ 2yrs

21

MSU Royalty Policy

First $5000 goes to the inventor(s). Patent expenses are then recovered.

Net Royalty Inventor(s) Academic UniversityNext $100,000 33.3% 33.3%

33.3%Next $400,000 30% 30% 40%Next $500,000 20% 20% 60%Excess >$1M 15% 15% 70%

22

Procedure for inventions at MSU Inventors submit an invention disclosure form

describing the invention, whether the research was supported by government or industry, publication details. http://www.egr.msu.edu/egr/research/techtransfer.php

OIP assesses invention, assigns a case number. Patent search initiated by attorney if invention is

complete enough [D-I-Y at http:www.uspto.gov]. If patentable, decision made by committee on whether

to file a patent based on financial and other basis.

23

Procedure for inventions at MSU (continued)

If a patent application is filed, it will be reviewed by the Patent Office approximately 12-18 months later.

Patents will be published by the USPTO after 18 months.

If a patent issues, it is usually about 2 years after the initial filing. Patent is valid for 20 years from the filing date.

24

Industry Patent Policies Who owns IP – inventors or

employer? Employee Agreement as condition

of employment Does the inventor get royalties?

25

Employment Agreements Typically are a condition at hiring &

include salary, benefit details. Often include trade secret &

confidentiality language for a term that exceeds termination from the company.

Includes IP ownership information. May include non-compete language to

prevent you from working for a competitor for a period of time.

26

Why Patents are Important to Start-up Businesses

Patents are key to solidifying product protection

Patent portfolio a significant asset when company needs funding (from investors, venture capitol, etc.)

Patent filing/protection needs to be part of initial company formation/planning

27

A Start-up Success Story Red Cedar Technology

http://www.redcedartech.com/ Co-Founded by Drs. Goodman and

Averill Licensed MSU Design Optimization

Technology developed by MSU Engineering Faculty

28

Typical Clauses in Company Agreement You cannot disclose or profit (monetarily

or otherwise) from company confidential information, trade secrets or customer lists. [disclosing trade secrets is a federal offense]

Anything you invent, discover or improve belongs to the company if it's related to the existing or planned scope of the company's business in any way.

29

Determining Inventorship Must include all who contributed

intellectually and creatively to the invention.

Best determined by the IP attorney. Need to have contributed to at least

one of the claims. If needed, royalty split can reflect

the relative efforts.

30

What you should have for an invention, besides a great idea Bound lab notebooks which

document the conception of the idea and the research

Periodic witness and dated signature by someone able to understand the invention, but who will not profit from it

Completed ID form noting any sponsors, publications and all inventors.

31

Licensing Intellectual Property Licensing handled by OIP staff at MSU. Most likely licensees are those who sponsored

the research, companies the inventors suggests, or those in a similar or competing business.

Maybe a start-up company will be formed around the technology

32

Lessons Learned When Licensing Goes Bad…. Important to have termination clause May need to restrict “field of use” to a specific

field [i.e. automotive, not transportation] Terms may restrict inventor from working with

other companies on future research if IP is already committed

Other reasons to Terminate: Failure to obtain necessary capital to develop

product Failure to take product to market (shelving rather

than developing) Failure to meet other financial/marketing milestones

33

Major Financial Parts of a License

an “up front fee” (must at least cover patent costs to date)

running royalties of a % of sales (~3-9%)

future patent costs (including foreign patents)

often includes minimum royalties based on milestones

34

Contacting Potential Licensees Use a non-proprietary description of the

invention to assess their interest initially. Have a Confidentiality Disclosure Agreement

signed in order to provide additional technical details or speak with the inventors. http://www.msu.edu/unit/oip/cda2001.html

A Provisional Patent application may be filed for added protection before speaking with industry.

If they are still interested, arrange a meeting to discuss the “next step” - research dollars, option, license, etc.

35

Key Points for Confidential Disclosure Agreement or Non-Disclosure Agreement

Must define the specific subject to be discussed, and any documents/materials must be marked “Confidential”.

Must have a reasonable term of enforcement defined (i.e. 1-5 years).

Must include other ways the information could have been received/dispensed (by a third party, already known, required by law, etc.)

Must be signed by an authorized representative of the company/institution (usually not the individual in the discussions).

36

Summary

Basics of Intellectual Property Why we want to protect and

license IP Various ways to protect IP Mechanisms for getting the

technology out to the public