1. Crafting Your IP Strategy Stephanie L. Chandler, Esq. October 12, 2007 Jackson Walker L.L.P. www.jw.com Center for Innovation and Technology Entrepreneurship Technology Entrepreneurship from Innovation to Business Venture

2. Stephanie L. Chandler Business Transactions and Intellectual Property Specialty Area: Technology Transfer and Commercialization University of Nebraska B.S.B.A. in Finance University of Virginia Juris Doctorate Community Involvement: San Antonio Technology Accelerator Initiative Entrepreneurship Alliance Committee Member, UTSA – Engineering College Advisory Council, Texas Emerging Technology Fund RCIC Selection Committee

3. Types of Intellectual Property Patents -- gives the inventor the right to exclude others from making the invention Trade Secrets/Know How -- protection by virtue of secrecy Trademarks/Service Marks -- identifies a unique source of goods or services Copyrights -- protects from copying of original works (music, books, software code)

4. Business name……………trade name Product marks and logos...trademark Software, texts, music…….copyright art, creative works Inventions…………………..patent Examples

5. ABC Inc. Employee, Customer and Supplier Goodwill Common Law Trademark and Trade Secret protection Building, Equipment, Inventory Registered - Trademarks, Trade Dress, Copyrights Patents – Utility Design, Business Method IP assignments and noncompetes - employees and contractors Formal Trade Secret Protection Form contracts - suppliers and customers ASSETS Soft Assets Hard Assets Extra Assets

6. PATENTS

7. Patents Definition: A patent is a grant from the U.S. government allowing its owner to exclude others from making, using, offering to sell, selling, or importing into the U.S. his invention There are three types of patents: –Utility patents, which protect new and useful inventions and processes –Design patents, which protect new and ornamental designs for articles –Plant patents, which protect new and distinct plant varieties that are asexually reproduced Utility patents are the most common: approx. 90% in 1999

8. Any new and useful –Process –Machine –Method of manufacture –Composition of matter –Improvements on existing things –Software –Methods of doing business What’s Patentable?

9. Patents What is protectable? –Can’t patent laws of nature, mental processes, mathematical algorithms per se or abstract ideas –Utility patents are available for the invention or discovery of any new, useful and non-obvious process, machine or invention Novelty means that the invention is new – even a minor difference conveys novelty. A single prior art patent that claims the same invention is enough to defeat novelty. Only “useful” inventions are patentable. Must have some utility or achieve some objective. Inoperative inventions do not have utility. Non-obviousness means that the differences between what is “out there” and your invention are not trivial to one skilled in the art. Somewhat subjective determination of the PTO examiner.

10. 17 years from issue date17 years from issue date (pre-June 8, 1995) 20 years from earliest U.S. filing date (post-June 8, 1995)20 years from earliest U.S. filing date (post-June 8, 1995) Outside of U.S. – typically 20 years from filing dateOutside of U.S. – typically 20 years from filing date Term ** Maintenance Fees must be paid to keep in force.

11. Patents Bar Dates: –For U.S. patent: application will be barred if not filed within one year of the first: Public use Public disclosure (e.g., printed publication) Sale/Offer for sale –For International patent: application will be barred if not filed before any public disclosure/public use of the invention anywhere. USPTO filing considered “filing” for this purpose –Best policy: File with the USPTO prior to any disclosure if possible to preserve foreign filing rights

12. Patents - Other Considerations Patents are issued on a country-by- country basis –A U.S. patent will not stop someone in Japan, etc. from exploiting the patent (you can stop imports of infringing goods, though) –No “international patent” –International process for obtaining national patents (Patent Cooperation Treaty, or PCT)

13. Patents - Other Considerations Provisional Patent Applications –Inexpensive way to get an invention on file with the USPTO; Filing fee ($160/$80) + legal fees is typically less than $2,500 –Must enable; no new matter in the later, regular application –Must file regular application within 12 months to maintain priority of filing date

14. Patents – Other Considerations Laboratory Notebooks – What are they? –Technical diary; –Ideas, completed work, and accomplishments; –Chronological order; –Helps avoid repeated mistakes; and –Helps to track successes and failures. http://www.rod.beavon.clara.net/lab_book.htm http://www.ruf.rice.edu/~bioslabs/tools/notebook/notebook.html http://www.chem.uky.edu/courses/common/notebook.html

15. Closest known prior art- Novel Features- Advantages over prior art- US Patent # 6,245,999; 6,458,123 www.uspto.gov Witness and Date Beverage Container Animal Stomach

16. What should be entered into notebook? Title (what is the invention called) Purpose (what the invention does) Description (functional and/or structural) Sketch (informal sketch) Ramifications Novel features Closest know prior art Advantages

17. A Patent May Have Huge or Little Commercial Value

18. My Invention A. Cup B. Handle C. Metal Disc D. Magnet

19. PATENTABILITY ANALYSIS Patentability Operation Invention ABCD Your Description Novelty subtraction Leaves Obviousness subtraction Leaves --A --AB ABC ABCD --ABC ABCD Combinations obvious “to a person having ordinary skill in the art” are not patentable (§ 103) Prior art combinations are not patentable (§ 102) Combinations novel to your invention Combination that might be patentable

20. INFRINGEMENT ANALYSIS Patent Claim Claim’s Elements Accused Devices Patent Infringement A A AB ABC Yes 1 2 3 AB ABC A AB ABC A AB ABC No Yes No Yes Claim Value High value Moderate value Low value

21. ABC … XYZ Invention ABC … XY Prior Art ABC … XYZ Patentable Combination Everything new is patentable (almost) – if you add enough elements to the claim

22. SCOPE OF CLAIM 1 WITH ELEMENT A A High Value A Boundary Infringements

23. SCOPE OF CLAIM 2 WITH ELEMENTS A AND B Moderate Value Infringements A+B Boundary A B

24. SCOPE OF CLAIM 3 WITH ELEMENTS A, B AND C A+B+C Low Value Boundary A B C Infringements

25. SCOPE OF A CLAIM WITH ELEMENTS A, B, C... Z SCOPE OF A CLAIM WITH ELEMENTS A, B, C... Z. Z Easy to get / but tiny infringement value. No competitors’ accused devices or methods have all elements A,B,C... Z Boundary A+B+C+Z A B C.Z

26. PATENTABILITY VS. INFRINGEMENT 1.Everything new is patentable (almost) - if you add enough elements to the claim. 2. But the more elements needed to get a patent, the less its value (maybe zero) - because fewer accused devices and methods infringe.

27. TRADE SECRETS

28. Trade Secrets Definition: Trade secrets consist of any valuable information not generally known to others that gives its owner a economic or competitive advantage and for which reasonable steps are taken to maintain its secrecy

29. Patents vs. Trade Secrets Pros: –Patents protect against independent development and reverse engineering –Trade secret lost if not maintained secret Cons: –Patents have a more limited life (20 yrs vs. indefinite); Thereafter, anyone can use Coca-Cola formula has been a trade secret for over 100 years and counting –Patents are more expensive to obtain and maintain; Trade secrets cost nothing other than expense of keeping secret

30. YOUR TRADE SECRETS ARE ONLY PROTECTABLE IF THE JURY FINDS THAT: The items were relatively secret; and The defendant knew the items were secret.

31. TRADEMARKS

32. Trademarks Definition: a trademark is a word, name, symbol, device or combination thereof that identifies and distinguishes one’s goods and services from those of another –Technically, a trademark is used to identify a good or product and a servicemark is used to identify a service

33. PROTECTABILITY OF TRADEMARKS Generic – Unprotectable (soda for a beverage or TV for a television) Descriptive - May be protectable (Jury question: Does it primarily describe or identify?) (such as “Tax Preparation Software” for a software program that enables users to prepare tax returns) Suggestive – Protectable (such as Greyhound for bus services and Jaguar for automobiles, with both marks suggesting the speed of their products; 7-ELEVEN for convenience stores) Arbitratory or Fanciful - Very protectable (such as Kodak, Starbucks, Verizon, Exxon)

34. Trademarks How trademarks arise: –Trademarks arise through use of a mark –Simple use of a mark grants rights in the mark against later users in the location of use and a reasonable area of expansion Can prevent use of mark on similar products or for similar services –Federal registration, although not required, protects the mark nationwide against later confusingly similar uses –Common law also applies Can be lost if mark becomes generic: e.g., Kleenex, Xerox

35. COPYRIGHTS

36. Copyrights Definition: Copyright is a form of protection to a wide variety of works, including literary, musical, dramatic, graphic, sculptural and architectural works, motion pictures and sound recordings –Not just critically acclaimed works –Extends to advertising brochures and copy and computer programs

37. Copyrights How copyrights arise: –Copyright protection exists from the moment a work is created –No registration is required –Copyright lasts for the author’s life plus 70 years (or in the case of works created by employees for their employers, for 95 years from publication of the work or 120 years from creation, whichever is shorter)

38. Copyrights What is protectable: –Copyright protects works of original authorship –Includes books, magazines, promotional materials, music, posters, movies, slide presentations, dance routines and website content –Does not extend to ideas, procedures, processes, systems, concepts or mere slogans, titles or blank forms

39. COMMERCIALIZATION

40. Licensing Patents -- gives the inventor the right to exclude others from making the invention Trade Secrets/Know How - - protection by virtue of secrecy Trademarks/Service Marks -- identifies a unique source of goods or services Copyrights -- protects from copying of original works (music, books, software code) License Third Party$$$$ Idea *The terms of licensing and joint venture relationships can add or subtract value.

41. License vs. other Structures Be aware of other structures –Joint Ventures/Collaborations –Outright Assignments –R&D Partnerships –Manufacturing/Supply Arrangements –Equity Investments (often coupled with License Agreements)

42. Product Story Florida State University Cancer treatment drug Licensed to Bristol-Myers Squibb, which began production in 1992 BMS's leading anti- cancer drug, with 1998 worldwide sales in excess of $1 billion.

43. Bottom Line Impact Pioneering research in both biotechnology and imaging enabled the University of Rochester to double the amount of revenue its basic research earned this year. The advance, to $29.5 million for the fiscal year that ends June 30, 2001, is more than double the $13.5 million that companies paid last year and 10 times the $2.9 million in royalties from the previous year. - Strong Health, © 2001 Prior to 1980, fewer than 250 patents were issued to U.S. universities each year and discoveries were seldom commercialized for the public's benefit. In contrast, In FY 99, AUTM members reported that 3,914 new license agreements were signed. Between FY 1991 and FY 1999, annual invention disclosures increased 63% (to 12,324), new patents filed increased 77% ( to 5,545) and new licenses and options executed increased 129% (to 3,914). - Association of University Technology Managers (AUTM), © 2001

44. License Income (Average FY 2004 - Source: Association of University Technology Managers ) $ $ New York University$80,908,972 $ $ Baylor College of Medicine$ 6,758,000 $ $ University of Texas - Austin $ 5,057,647 $ $ UTHSCSA $ 2,211,194 $ $ UTHSC-Houston $ 1,998,947 $ $ University of Houston $ 534,053 $ $ University of Tx Med Branch $ 222,994 $ $ Texas Tech $ 157,365 $ $ Rice University $ 122,000

45. Inventor is Key to Commercialization Inventor knows field Inventor knows potential licensees Inventor can continue to invent to fill product pipeline for new ventures Get to know the OTV Get to know the University policies – this can be very lucrative for a professor

46. University/small company files a patent application on an invention, however, they do not have the resources to: Manufacture, Distribute, Import, Market, and Sell the product based on the invention.

47. Field of Use vs. Territory Use Limitation –Allows multiple licensees to exploit different uses of the same technology –Should Smallco limit the Field of Use? Should Bigco demand unlimited rights (limited only to the scope of the Patents and Know How)? Geographical Limitation on the rights to exploit Patent Rights and Know How

48. Diligence Obligations Must Bigco commit to some level of diligence in commercializing the technology? –Termination rights –Minimum royalties –Exclusive vs. non-exclusive

49. Payment Terms Advance Fees/Upfront Fees Milestones Royalties

50. Advance Fees/Upfront Fees Lump sum payment for entering into the license agreement May be used to reimburse Smallco for past R & D costs and fund future R & D expenses Different factors impact determination of upfront fees (R&D costs, market potential, industry convention)

51. Milestones Future payments to Smallco upon meeting defined goals Incentive used to motivate parties to advance project E.g., First commercial sale of System

52. Royalties Percentage of Product Sales Based on “Net Sales”, but is only net of returns, mandatory reimbursements and rebates Cost of Goods Sold typically is not deducted when determining Net Sales Audit rights (Right to check licensee books and records to ensure proper payment)

53. TRADEMARKS–Federal registrations COPYRIGHTS–Copyright registrations PATENTS–Know how to create value – rely on the experts TRADE SECRETS–Create good facts LICENSES – Clarify expectations

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55. Stephanie L. Chandler Jackson Walker L.L.P. schandler@jw.com210.978.7704 schandler@jw.com Crafting Your IP Strategy Questions? Jackson Walker L.L.P. www.jw.com www.jw.com Austin  Dallas  Fort Worth  Houston  Richardson  San Angelo  San Antonio Sign up for eAlerts at http://www.jw.com/site/jsp/subscribe.jsp