IP 101IP 101Sherylle Mills EnglanderSherylle Mills EnglanderDirector, TIADirector, TIAUCSBUCSB

Alvin VirayAlvin VirayPatent & Licensing Officer, OTAPatent & Licensing Officer, OTAUC IrvineUC Irvine

Basics of Intellectual Property

byAlvin Viray, Esq.Patent & Licensing OfficerUC Irvine

1. IP Copyright Patents

2. What is a license?

3. Technology Transfer

Intellectual Property

1. Trademark2. Trade Secret3. Copyright4. Patents

Asset developed by the mind which enjoys specific legal protection

Trademark Identifies source of goods/services Name, logo, etc. Protects TM holder & Consumers

Trade Secret

?

CopyrightOwner has exclusive right to do and to authorize others to:

•To reproduce the work;

•To prepare derivative works;

•To distribute copies by sale or other (rental, lease, etc);

•To perform the work publicly; and

•To display the work publicly;

CopyrightProtects “original works of authorship”:

Literary Video Music Software, etc.

UCI’s No. 3Assessment and Learning in Knowledge Spaces

CopyrightHow long? Lifetime of the author + 70 years For “works made for hire” 95 years

from publication or 120 years from creation, whichever is shorter.

Copyright protection is automatic Registration offers advantages.

What is a Patent?• The right to prevent others from

making, using, selling, offering for sale• Gov’t backed monopoly

– USPTO

• How long?– 20 years from filing– Typically 3 years for issuance/approval– 17 year monopoly

What can be Patented?“Anything made by man”:

1. Composition of Matter• Chemical composition of a drug

2. Method• Process of making drug

3. Product/Use• Treatment of hypertension • Treatment of sexual dysfunction

4. Machine5. Improvements Thereof?

• NOT anything made by Nature

UC System 2009 Fab 51. Hepatitis-B Vaccine - UCSF2. Treatment of Intracranial Aneurysms - UCLA3. Interstitial Cystitis Therapy - UCSD4. Egf Receptor Antibodies - UCSD5. Bovine Growth Hormone - UCSD

UCI Top 3

1. Dynamic Cooling Device – Candela, Stuart Nelson

2. Detection of Mycoplasma - Abbott Laboratories, Eric Stanbridge

3. ALEKS – McGraw-Hill, Jean Claude Falmagne

USPTO RequirementsA valid, issued patent must be:1. “Enabled”

Make and use Best mode

2. “Reduced to Practice” Works for its intended purpose

3. “Novel” New Based on “prior art”

4. “Non-obvious” Q: would a person of ordinary skill in the art

say that your invention is obvious in light of the “prior art”• Rationale • Degree

Patent Bars

• Invention becomes publicly known prior to filing a patent.

• Cannot be patented after a certain time.• Rationale: What is in the public domain stays

there

Public Disclosure BarTo qualify as a bar:

1. Disclosed By anyone Anywhere

2. Recipient has no duty of confidence Implied vs. Explicit

3. “Enabling” Make and use

Bar protection

File a patent application firstProvisionalNon-provisionalPCT/Int’l application

For publications: – Foreign nations - dedicated to public– US - 1 year grace period

What is a License?• A written agreement which grants permission

to make, use and sell “intellectual property”– Trademark – Copyright – Patent

• Rights are granted by the owner of the IP to a non-owner– Owner = “Licensor”– Non-owner = “Licensee”

UCI Licensees • Existing companies• Entrepreneurs

– Serial– Inventors

• 30+ startups created:

– 23 still operating or acquired with rights to

• 40 issued patents

• 84 patent applications

• 10 copyrighted works

• 80 Active Licenses as of 2008

PROVISIONAL

ONE YEAR for

MARKETING

PATENTABILITY

TECHNICAL ASSESSMENT

NON-PROVISIONAL

ABANDON

Tech Transfer

PATENT COSTS

SPONSORSHIP

DILLIGENCE

Startup or

Company

OwnershipDid the IP involve:• The duties and scope of my UCI employment• UCI time or resources• A gift, grant, or contract funds via UCI• UCI obligations to other parties

If ‘NO’ and your chair/dean agrees, then it is waived.

IP in Research Agreements

STEP ONE:NEVER GIVE UP

TITLE!!

Why Retain Title?

• Ensure open dissemination• Ensure availability for future research• Ensure public interest is met• Meet 3rd party obligations (incl. 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

PropertyWhat’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!

Scope of IP

Keep obligations to Sponsor IN the box!

Scope of IP

Licensing Rights - Caveat

“To the extent that University has a legal right to grant such license…”

• Other sponsored research in the lab?• Research in other labs?• Material transfer agreements?• Agreements handled by other university offices?• Circumstances surrounding co-inventors?

Licensing Rights

Royalties

“Said license shall be … royalty-bearing”

• Royalties and fair consideration are determined as part of license negotiations, not in advance

• In a research agreement, avoid:– Pre-set royalty– Pre-set royalty cap– Royalty-free

Invention/copyrightable work doesn’t exist yet, no way to know its value

“Royalty Free” is not the same as “Paid up”!!

Licensing Rights

Going Beyond the Basics

Research Agreements

Know-How• What it is:

– The information/data, potentially unpublished and in the researcher’s mind, that helps get the result he/she is looking for

• Do not give rights to know-how! – Do not know what is in the researcher’s head – how

do you know it was fully disclosed?– Most universities have no policy to require disclosure

of know how– If granted an “exclusive right” to know-how, research

project itself could become encumbered.• Watch giving exclusive rights to data, as well!

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 exclusively 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: 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

filed 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)

NERFs and Sublicensing

• Avoid NERFs that include “right to sublicense”– Otherwise, Sponsor can grant permission 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 fro 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• 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 it’s 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

Background BIP• More information:

– University of California Policy outlining the risks to consider, with a Sample Clause (mitigating effect):

http://patron.ucop.edu/ottmemos/docs/ott00-002.html

Election Periods and Multiple Bites at the Apple

Long election periods• The issue:

– Sponsor does not have to commit until the end. University cannot market the technology to other interested parties if a sponsor still has the right to request an exclusive license

• Meanwhile, University has to pay patent costs!• Meanwhile, University can’t offer to others!

(Essentially, a free exclusive option agreement)

– Some technology areas move quickly – keeping a technology “on ice” for 1-3 years can render an otherwise licensable technology obsolete by the time it is unencumbered.

Long Elections: Mitigation• Offer short election period with clear ability to secure reasonably-

priced option agreement in lieu of a full license

• Avoid election periods that expire upon:– “Issuance of patent” (3- 5 years!)– “Receipt of First Office Action” (1 – 3 years!)– “Receipt of Notice of Allowance” (3-5 years!)Base election expiration on date disclosed to sponsor!

• If a long election period is unavoidable, at least require Sponsor to reimburse all patent costs incurred during the election period!

Right of First Refusal• What it is: Upon the expiration of the election

period, Sponsor has the “right of first refusal” over any future licenses granted by the university.

• What it means: If the university locates a licensee after the sponsor has reviewed, and passed, on the technology, university must negotiate a deal with the potential licensee and then offer it to the sponsor!– If the sponsor wants, they can enter into the license

instead of the potential licensee

Right of First Refusal• The problem:

– It makes an invention unlicensable. No company will negotiate for 3-6 months knowing a competitor can take the deal they work out.

• Mitigation: – Negotiate it out. – Insert reasonable election period with ability to

secure modestly-priced option agreement to allow further evaluation.

“Most Favored Nations”• What it is: University cannot give any licensee terms

that are more favorable than those provided to the sponsor.

• The problem – what is “more favorable”?– No two licenses are alike – particularly if different market

sectors are involved. • Is a low royalty with high annual fees better than low annual fees

with higher royalty?• Does taking equity make a more favorable deal? Or Less?• How do you create “equal” deals if one market is low volume, but

has an 80% profit margin, and the other is high value, with only 5%?

• What if one company uses the patent for incremental improvement on an existing product and the other for an entirely new product?

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 chance to “opt out” of project– Once a Software is “open sourced” it cannot change

back – the decision is irrevocable.– Not all open source licenses are alike – work with your

tech 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.

Engage your tech office and ask for help. . . .

After all. . .

they have to live with the terms of the award.

If all else fails. . .