Wolf, Greenfield & Sacks, P.C. | 600 Atlantic Avenue | Boston, Massachusetts | | fax | wolfgreenfield.com Intellectual Property for Startups presented by Ed Walsh Dan Young August 25, 2010

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 2 Presentation Team Edmund J. Walsh B.S., Electrical Engineering, Boston University M.S., Electrical Engineering, Stanford University J.D., Suffolk University Law School Daniel W. Young, Ph.D. B.S., Marine Engineering, Massachusetts Maritime Academy M.E., Biomedical Engineering, Worcester Polytechnic Institute Ph.D., Biomedical Science, University of Massachusetts Medical School J.D., 2012 Candidate, Suffolk University Law School

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 3 Desired Outcomes for Today  Intellectual property (IP) overview  Patent basics  IP issues in context of startup life cycle  Wrap up

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 4 Major IP Tools  Patent  Protects inventions  Trademark  Protects identification of source of good/services  Copyrights  Protects expression  Trade secret  Protects secrets; can be inconsistent with patenting

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 5 IP Summary Trademark  Rights - use  Term - registration 10 years, renewable  Remedy - injunction, damages (infringer’s profits, costs, destruction of items bearing infringing mark) Copyright  Rights - reproduce, distribute, display, make derivative works  Term - life +70 years, or  Remedy - injunction, seizure, damages (actual and infringer’s profits, statutory) Trade Secret  Rights - use/disclose  Term - indefinite  Remedy - injunction, damages Patent  Rights - exclude others  Term - 20 years from filing  Remedy - injunction, damages (lost profits, royalty)

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 6 IP Strategy Perspective – Offensive Leverage Innovation  Block competition in product sales  Support joint ventures or other cooperative arrangements  License or sell IP  Marketing advantage  Increase corporate value for buyout, spinouts or investments

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 7 IP Strategy Perspective - Defensive Freedom to Innovate  Promote awareness of IP risks  Position for cross license  Formal  Informal  Block others from patenting  Increase corporate value for buyout, spinouts or investments

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 8 Building Your IP Toolbox  Costs  Direct monetary costs  Indirect costs (e.g. opportunity cost of diverting creative individuals)  Vary widely among different types of tools  Timing  Cannot create property right in idea once it enters public domain  IP tools must be created before they are needed  Can be critical for securing protection

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 9 Reducing IP Risks  Damages for IP infringement can be substantial  Clearance search (“Freedom to Operate”)  Patents and trademarks are cataloged  Adopt procedures to avoid infringement  Trade secret and copyright infringement requires affirmative actions

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 10 Utility Patents Ball Point Pen

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 11 Design Patents

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 12 Plant Patents – Go Sox!

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 13 Patents  Utility Patents:  Issued for the invention of a new and useful process, machine, manufacture, or composition of matter, or a new and useful improvement thereof  ~90% of all patents  Plant Patents:  Issued for a new and distinct, invented or discovered asexually reproduced plant  Design Patents:  Issued for a new, original, and ornamental design for an article of manufacture

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 14 Patent Basics: The Claims  Claims define blocking right  Infringement, freedom to operate, design around, license  Describe useful, novel, and non-obvious invention  Prior art constrains claim scope  Supporting specification  Written description  Best mode  Enable others to make and use

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 15 Patent Process CONCEPTION 0 YEARS PROVISIONAL APPLICATION REGULAR APPLICATION EXAMINATION RESPONSE(S) ALLOWANCE PATENT ISSUED WITHIN 1 YEAR PAY FEE MAINTENANCE FEES TERM: 20 YEARS FROM EARLIEST FILING DATE PUBLICATION

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 16 Novelty as to the Invention Date  Idea must be “new” relative to when you make invention  Known or used by others in U.S.  Patented or described in printed publication  Subject of patent application  Invented by someone else

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 17 Novelty as to the Filing Date - Statutory Bar  Idea must be “new” relative to when you file patent application (1 year grace period):  Patented or described in printed publication - anywhere  In public use or on sale – in U.S.  Different in other countries

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 18 Provisional Patent Applications  Cannot issue as patent  Not examined by USPTO  Automatically becomes abandoned 1 year after filing  Utility application can claim “priority” to provisional  Cannot claim priority to another application provisional application non-provisional application patent one year or less examination by USPTO

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 19 When to File a Provisional Application  Ongoing product development  Ongoing market research  Risks:  Inadvertent disclosure  Inadequate, non-enabling disclosure  Must convert to utility and foreign application within 1 year

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 20 PCT Process PRIORITY APPLICATION PCT APPLICATION SEARCH REPORT SEARCH CH. II DEMAND EXAMINATION WITHIN 1 YEAR NATIONAL STAGE APL’s IPER WRITTEN OPINION RESPONSE

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 21 International Filing Issues  Where to file?  When to file?  What to file?  How much will it cost?

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 22 International Filing Issues: Where to file?  Manufacture locations  Competitor locations  Substantial sales  Future plans  Availability of protection for your invention

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 23 International Filing Issues: What to file?  Patent Cooperation Treaty (PCT) application  European regional application  Direct national application (Ger, Fr, It, etc.)  Utility model

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 24 International Filing Issues: Significant Costs  Filing fees  Translations  Prosecution costs  Grant/issue fees  Opposition  Annuities

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 25 Startup Life Cycle Formation Development Launch Funding Liquidity Event IP Needs

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 26 Formation  Fewest resources to devote to IP tools, but time when much IP is being generated and/or acquired  Most investment is ahead of you  Important time to know if you have right to use ideas

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 27 Development  May hire employees or consultants  Employment agreements to take ownership of IP and ensure confidentiality  Consulting agreements – may be even more important than employee agreements  May generate more IP  May need to disclose ideas  File patent applications, at least provisionals  Before disclosure is better  U.S. has one year grace period, so after is possible  Use NDA’s, if appropriate  What about investors?

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 28 Launch  Definite disclosure of ideas  Should have offensive IP strategy in place  Trade secrets may lose effectiveness  May be first opportunity for competitors to evaluate your product for infringement  Should have ideas about defensive strategy  Key point for “willfulness”

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 29 Funding  Investors care about:  Likelihood that you have sustainable advantage  Risk their money will be wasted fighting over infringement of IP  Degree of certainty required depends on amount and characteristic of investment  Smaller dollars and higher overall risk, less rigid  May accept plan and process being followed, without requiring protection  Amount done before funding versus done after can affect:  Length and cost of diligence period  Percentage of ownership you give away

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 30 Liquidity Event  Competitors will take notice  Defensive IP strategy should be in place  Greater opportunity to fund IP: backfill  Convert provisionals to ordinary applications  File patents on inventions disclosed within grace period  Patent new insights: picket fence approach

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 31 IP on a Limited Budget  Be selective  Offensive  Focus on what is new and key to your business  Consider patentability, protectability and enforceability  Defensive  Focus on issues most likely to be disruptive  Focus on known competitors  Use lower cost IP tools  Trade secrets

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 32 Be Selective Electrified Table Cloth (not every innovation is worth protecting)

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 33 Do It Yourself?  Permissible  Benefits  Lower cost  Drawbacks  Opportunity cost  Quality  Half and Half  Effective working relationship with professional advisors may allow you to provide inputs that reduce, but not eliminate need for professional services

© 2010 Wolf, Greenfield & Sacks, P.C. All rights reserved. 34 ? Questions