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Intellectual Property - Demystified Dianne Archer, J.D. Stanford University, School of Engineering Director, Engineering Research Administration Kate.

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Presentation on theme: "Intellectual Property - Demystified Dianne Archer, J.D. Stanford University, School of Engineering Director, Engineering Research Administration Kate."— Presentation transcript:


2 Intellectual Property - Demystified Dianne Archer, J.D. Stanford University, School of Engineering Director, Engineering Research Administration Kate Tallman University of Colorado, Technology Transfer Office Director UCB/UCCS NCURA Region VI Conference, April 3 - 5, 2011

3 So What, Exactly, Is Intellectual Property?

4 Definition – Intellectual Property l The four types of intellectual property recognized in the U.S.: »Patents »Copyrights »Trademarks »Trade Secrets l 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.

5 Intellectual Property l 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

6 Data and Know-How: The Foundation of Intellectual Property

7 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

8 Data l Data: »Does not embody any IP rights »Can be information that is used to create IP »May or may not be recorded l Data itself cannot be owned l 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

9 Know-How l 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 l 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

10 Trademarks and Trade Secrets

11 Trademarks l “A trademark is a distinctive mark of authenticity through which products of particular manufacturers may be distinguished from those of others.” l Examples include: »Nike swoosh™ »Coca Cola ® shaped bottle »Stanford tree »University of Colorado buffalo l Generally trademarks do not arise in a university research context

12 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. ” l Examples include: »Coca Cola formula »KFC secret recipe l Universities do not keep trade secrets! But companies do, thus, confidentiality sections and non-disclosure agreements.

13 Patents

14 What Is a Patent? l Protects a new and useful process, machine, or composition of matter, i.e., an invention »“Anything made by man” l The right to prevent others from making, using, selling, offering to sale or importing invention. l Must apply to government for patent (not automatic) l Term of patent: 20 years from filing application »Patents are “prosecuted” for 3-5 years, then get “issued” by the government

15 What Is Patentable? l Invention must be »Novel »Useful »Non-obvious and, both conceived and reduced to practice (i.e., proven to work) l 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.)

16 Copyrights

17 What Is a Copyright? l Copyright protects only the expression of an idea »Does not protect facts or ideas themselves -For example: l protects a report describing the results of a research project l does not protect the actual ideas, data or discoveries described in the report

18 Copyrights l Conveyed automatically when the work is created and fixed in a tangible form l Grants owner exclusive rights to: -- Reproduce l Prepare derivative works l Distribute copies l Perform publicly l Display publicly l Long term: Lasts for life of the author plus 70 years

19 Copyright l Long term – life of the author plus 70 years »95 years if owned by corporation l Grants owner the right to: »Reproduce »Prepare derivative works »Distribute »Perform work publicly/display work publicly l Applies to software (software considered a “language”) as well as books, articles, music, etc.

20 So...Why All The Fuss?

21 The Fuss: The University View l The Reality: Most inventions developed at the university are lucky to break even! »Out of 9,500 inventions in University of California portfolio, Top 25 make 76% of revenue. (Top 5 make 48%)! l 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.

22 The Fuss: Company View l 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. l 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

23 The Fuss: Company View l 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.

24 The Fuss: Company View l 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.

25 Intellectual Property in Research Agreements “Putting Theory to Words”


27 Why Retain Title? l Ensures open dissemination of results l Ensures availability for future research l Ensures public interest is met l Meets 3 rd party obligations (inc. federal) l Implications for tax-free bonds l Integrity of IP portfolio  Focus on providing Sponsor with access and use, rather than title

28 Title/Ownership l Ownership should always follow inventorship or authorship »Determined in accordance with U.S. patent law l 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!! l Focus on access rather than ownership

29 Scope of Intellectual Property What’s in the Box?

30 In the Box l 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 l Limit to period of performance of Agreement » Avoid reaching to past or future work l Limit to patentable inventions » Avoid reach to tangible materials, know-how,… l Limit to certain copyrightable works

31 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!

32 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: “ the performance of research under this Agreement as described in Attachment A” (where Attachment A includes a well-defined SOW) » Better yet #2: “ 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!

33 Keep obligations to Sponsor IN the box!

34 Pop Quiz: How Does This Look? l “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.”

35 The “Kitchen Sink” Definition Re-defined l “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.”

36 Licensing Rights – the “Basics”

37 What is a License? l IP owner grants their exclusive rights to another party by a written agreement: »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 l IP Owner = “Licensor” l Non-owner = “Licensee”

38 Licensing Rights l Scope of rights »Separate patents from copyrights l First right to negotiate (see handout) »“Option” to negotiate »Not outright grant »Not right of first refusal l Time limits to elect and negotiate l Release of obligations (see handout) l Financials and Diligence (see handout)

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

40 NERFs l 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

41 NERFs: Mitigation l Best practices for NERFs: »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, and sign a license agreement »Restrict to “internal research purposes only.” »Restrict to specific field of use of interest to company (i.e., a NERF for aerospace applications only) »Avoid granting “irrevocable” or “perpetual” NERFs »Insert statement that sponsor must actively develop products to maintain NERF (i.e. no shelving of technology)

42 NERFs and Sublicensing l 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

43 Non-Asserts: “NERFs in Disguise” l What it is: A contract term where the university agrees “not to assert” particular patents or copyrights against the company l 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.

44 Joint Ownership (“NERF in Disguise”) l “Why don’t we just simplify things and jointly own any inventions?” (Sounds fair?) l 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.

45 A Word On.. Joint Patent Expenses l 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 l Avoid this term – creates large, unfunded liability (particularly if they have right to file for patents) l 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”)

46 Background Intellectual Property

47 Background IP (BIP) l 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 l 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!

48 Mitigation of Background IP l 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! l 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

49 Copyright Licensing Disclaimer – the views expressed here may not be consistent with practices at your University

50 Review on Copyright l Copyright protects only the expression of an idea l Grants owner the right to: »Reproduce »Prepare derivative works »Distribute »Perform work publicly/display work publicly l Applies to software (software considered a “language”) as well as books, articles, music, etc.

51 Software Copyright Assets l Value = person hours X creativity »Alternatively, it could have trade secret value l Software is never finished »Software not maintained or updated loses value l Software gains value as people use it l Some software gains value if a community of developers is formed l The key is to maintain the University as the party with the rights to all copyrights as the community grows »Could be University ownership or free license to University

52 Open Source Licenses l 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. l A requirement to open source any software developed on the project assures free access by Sponsor

53 Open Source Licenses l 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 »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 ( for a list of all open source licenses and their

54 Open Source Benefits l Attracts a user community l Attracts a developer community l Build a brand and reputation l If University has rights to all copyrights, it can offer commercial licenses to later versions of the software

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

56 Survival Tips l Engage your technology transfer office and ask for help.... After all, they have to live with the terms of the award l Take your General Counsel to coffee and ask for guidance on the legal issues (e.g. “shall grant”)

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