© 2013 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP IP Issues in Transactions F.I.R.E. Series, University of Rochester May 14, 2013 Ralph A. Loren Partner

Examples of corporate transactions that may have IP issues ♦ Licenses ♦ Investments ♦ M & A ♦ Loan Security ♦ Valuation ♦ S-1/10-K Risk Factors ♦ Employee/Consultant Agreements 2

Basic IP Law ♦ Patents ♦ Covers the idea itself ♦ Limited in time but absolute in scope ♦ Coverage on a country-by-country basis ♦ Trademarks ♦ Identifies the source of the goods or services ♦ Unlimited in duration ♦ Can be lost if term becomes generic 3

Basic IP Law ♦ Copyrights ♦ Covers the expression of an idea, not the idea ♦ Not limited to national boundaries ♦ Life of the author plus 70 years ♦ Trade Secrets or Know How ♦ Covers the idea itself ♦ Limited by secrecy but can be lost if it loses secrecy ♦ Does not cover independent invention or reverse engineering ♦ Domain Names ♦ Covers the URL only ♦ Has some trademark implications 4

Requirements for a Patentable Invention ♦ An invention must be: ♦ Patentable Subject Matter ♦ Novel ♦ Non-Obvious ♦ Enabled ♦ Description to Meet Written Description Standard ♦ Best Mode 5

Changes to Patent Law under AIA ♦ Under new Patent Act (March 16, 2013), First Inventor to File, not First to Invent is the basic test ♦ Different scope of prior art ♦ Grace Period for Inventor’s Disclosure ♦ New Post Grant Review Procedures: ♦ Post Grant Review in 1 st 9 Months after issuance – all grounds of invalidity possible ♦ Inter Partes review – After PGR – Only based on Patents and Printed Publications ♦ Derivation Proceedings – Did the Named Inventor get the Idea from Someone Else? ♦ Supplemental Examination – Patent Owner method to cure even Inequitable Conduct – Becomes Ex Parte Reexamination 6

IP Due Diligence Issues for any Transaction ♦ What type of IP exists? ♦ What is status of existing IP? ♦ Does it cover the product or process being sold or contemplated? ♦ Any additional IP available? ♦ What is licensed in and out? ♦ What is the competitive landscape? 7

What is the Status of Current IP ♦ Are there patents that cover methods or products being used by the company? ♦ Does the IP cover anything that is being sold or licensed out? ♦ Are there patents on the products or methods? ♦ Are there trademarks covering anything sold? ♦ Where is the IP filed and where is it being used? ♦ What is issued versus pending? ♦ Are additional foreign (or US) applications possible? ♦ What is the duration of IP remaining? 8

Is the IP Protection Sufficient? ♦ Does the IP cover critical products or processes sufficient to protect the company against competitors? ♦ Does the IP provide a picket fence or just single product protection? ♦ How strong are any trademarks or copyrights? ♦ Is the IP overbroad; that is, is it broad without more limited claims? ♦ Does the IP somehow provide differentiation from competitors? ♦ Can the IP be made stronger? ♦ Has lifecycle management been considered and planned for? 9

Is Ownership of the IP Correct? ♦ Is the IP owned by proper entity? ♦ Have the inventors signed all necessary documents? ♦ Has anyone claimed that the inventorship is incorrect? ♦ Are there any licenses outstanding to third parties? ♦ Are there any licenses that expired and if so, are there any provisions that last past expiration? ♦ If the IP includes ex-US rights, have all owners agreed to any license? 10

Licensed-In Technology Problems ♦ Are the rights in any licensed-in technology sufficient to cover the current (or future) products? ♦ What are the scope of the licenses? ♦ Were any licenses limited to research and if so, is it defined? ♦ Are the licenses exclusive or nonexclusive? ♦ How many different licenses are used on a product or process that would generate royalties (and who will claim them)? ♦ Are there viable anti-stacking provisions? ♦ Are these combination products or are the methods unique?

More Problems with Licenses ♦ Are there change of control clauses and how do they operate? ♦ What is the difference between a change of control clause and an assignment? ♦ Is there a restriction on assignment? ♦ Can the license be transferred? ♦ What is required to effectuate the transfer? ♦ Difference between operation of law and assignment ♦ Are there termination clauses that are onerous? ♦ Are there indemnity clauses that are a problem? ♦ Are there arbitration or venue clauses that are problematic?

Additional IP Available? ♦ Are there pending applications that can support additional claims? ♦ Are continuations or divisionals possible? ♦ Is there any additional technology that can (or should) be patented? ♦ Is the scope of filing geographically commensurate with the distribution of the products? ♦ Are the trademarks registered where necessary? ♦ Have the trade secrets/know-how been properly protected?

Competition Issues ♦ Who are competitors in the field? ♦ What are the competitive technologies? ♦ Does the IP provide specific advantages? ♦ Will the IP protect potential market share? ♦ If the technology is licensed in, are the licenses sufficiently exclusive to keep out competitors? ♦ Are there possible antitrust issues from the licenses; e.g., tying or Sherman §or 2 issues?

Freedom To Operate ♦ How important is IP to the deal? ♦ Is the pertinent IP in the form of patents, trademarks or copyrights? ♦ Is a Freedom to Operate study valuable in terms of cost? ♦ Will using the technology infringe any rights of others? ♦ Are others using related technology who might have blocking IP issued or pending? ♦ Are licenses available?

Duration of IP ♦ When does the critical IP expire (or does it expire)? ♦ Is the additional IP sufficient for differentiation? ♦ Do trade secrets/know-how provide sufficient coverage? ♦ Can any of the IP be extended? ♦ Are there ways to practice Life Cycle Management that are worth exploring?

Areas to Investigate for Life Cycle Management ♦ Methods of use ♦ Manufacturing processes ♦ Delivery methods and carriers ♦ Formulations ♦ Dosing

Any FDA/Governmental Filings that have been made and IP Effect? ♦ Is this technology subject to Patent Term Extension? ♦ Is a Patent Term Extension still available? ♦ If so, has a Patent Term Extension been granted? ♦ What product or process should be the basis of the extension? ♦ Is there some form of exclusivity available? ♦ NCE, NFE, Orphan

M & A/Investment Specific Issues ♦ Do the IP representations and warranties make sense? ♦ What reps and warranties have knowledge qualifiers? ♦ Ownership? ♦ Validity? ♦ Noninfringement? ♦ What is the effect of the Knowledge qualifier? ♦ Are all liens being released? ♦ Who will own IP? ♦ Change of control clauses?

S-1/10-K Issues ♦ Is the description of the IP accurate? ♦ Are the risk factors correct in terms of competitors and IP? ♦ Are there known threats that must be discussed? ♦ Is the description of any technology accurate? ♦ Have all liens on IP been released and recorded properly?

Consultant and Employee Contracts ♦ Are there agreements on who owns any IP generated during employment or consulting? ♦ Is the scope of the employment/consulting well defined? ♦ Are there work-made-for-hire issues? ♦ Scope of employment issues ♦ Consultants working for others ♦ Employees not hired to invent ♦ Special work made for hire issues on copyright ♦ Duration of agreement and is there a conflict with another job? ♦ Inventions made before the agreement

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