1. Patent Basics for Emerging Companies
Maria Laccotripe Zacharakis, Ph.D.
Thomas Hoover
Daniel J. Kelly
McCarter & English, LLP
Cambridge Innovation Center
March 20, 2013
2. BOSTON // HARTFORD // NEW YORK // NEWARK // STAMFORD // PHILADELPHIA // WILMINGTON
Introduction to Intellectual Property
Maria Laccotripe Zacharakis, Ph.D.
Thomas O. Hoover
McCarter & English, LLP
Cambridge Innovation Center
March 20, 2013
13. What is Intellectual Property?
♦ Intellectual property is a blanket term
covering areas of the law dealing with the
protection of property which “springs from
the mind.”
13
14. Why is Intellectual Property Important?
♦ Product development makes it essential that the
results of these efforts go as far and as long as
possible
♦ Protection for protectable new products is essential
– Without protection, new products may be reverse
engineered or knocked off freely (i.e., doing research and
development for competition)
♦ Patents are valuable
– Licensing
– Fundraising
14
15. Types of Intellectual Property
♦ Patents
– Disclose to the benefit of society in return for a
exclusionary period of substantial duration
♦ Copyrights
– Protect the expression of your ideas
♦ Trademarks
– Protect your goodwill in the marketplace
♦ Trade Secrets
– Keep commercially valuable information from your
competitors (if you can do so effectively)
15
16. What is a patent?
♦ A patent is a property right granted by the
government which gives the patent holder
the right to exclude others from making,
selling or using the invention claimed in
the patent.
16
17. Types of patents
♦ Utility patents
– Cover anything having an actual use – e.g.
machines, processes, compositions of matter
♦ Design patents
– Cover ornamental product designs
♦ Plant patents
– For distinct and new varieties of plants that have
been invented or discovered and asexually
reproduced.
17
18. Types of patents
♦ First Generation patents
– Protect first generation products and platform
technology
♦ Second Generation patents
– Protect where you and your competitors will go once
your product hits the market
♦ Others
– Offensive patents
– FDA Label patents, etc.
18
21. Requirements for patentability:
Novelty
♦ To obtain a patent, the invention cannot,
before the date of invention/date of filing
(AIA), be:
– Patented
– Known or used by others
– Described in a publication
Some exceptions under the AIA
21
22. Requirements for patentability:
Non-obviousness/Inventive Step
♦ Invention must not have been obvious to
one of ordinary skill in the art to which the
invention pertains
♦ Don’t rely on arguments, plan to obtain
data demonstrating unexpected results
over the art
– It can be difficult to anticipate what an examiner will
consider to be the closest art, so be prepared to run
experiments to support patentability
22
23. Requirements for patentability:
Enablement/Written Description
♦ Enable any person skilled in the art to make
and use the invention
– Examples are the best defense against enablement issues
♦ The specification must…
– Describe the claimed invention
No new matter can be added after filing
Problems typically arise when amending the claims
23
24. Patentable Subject Matter
♦ Examples of subject matter appropriate for
patenting include:
– Drugs and Biologics (e.g., new compounds, prodrugs)
– Formulations (e.g., new forms, carriers)
– Delivery Vehicles (e.g., matrices, nanoparticles)
– Medical Devices (e.g., catheters, bone screws)
– Methods of Treatment (e.g., new regimens or profiles)
– New Treatments (e.g., new uses for old drugs)
– Diagnostics (e.g., urine tests)
– New Designs (e.g., product or packaging design)
24
25. What is an “Invention”?
♦ An invention exists when…
– Conception is complete, and
– The invention is reduced to practice
Both can happen at the same time
25
26. What is an Invention:
Conception
♦ Conception has been held to be complete
only when the idea is so clearly defined in the
inventor’s mind that only ordinary skill would
be necessary to reduce the invention to
practice, without extensive research or
experimentation
26
27. What is an Invention:
Reduction to practice
♦ An invention has been reduced to practice
when…
– It has been built or practiced sufficiently to
show that it would work as claimed, or
– An enabling patent application has been filed
27
28. Inventorship
♦ Only persons who contribute to the conception
of the “claimed” invention may be named as
inventors
♦ If a collaborator merely conducts
experimentation dictated by another’s specific
idea, he is not an inventor, even if the tasks he
undertakes require skill and creative thought.
28
29. Inventorship
♦ However, if a collaborator aids in developing
the specific idea itself or through his
experimentation significantly refines the
original idea as to make it different from the
originally conceived idea, he has added to the
conception and should be named as an
inventor
29
30. Documenting the Invention
♦ Under the AIA, the US is no longer a “first to invent”
system. However, still important to
♦ File invention disclosures
♦ Maintain a laboratory notebook…
– Documents the inventive process
– Serves as the source of experimental data for patent
claims, patent examples, proof of concept, etc.
30
31. Note Keeping:
♦ Recording conception
– Clearly record facts surrounding invention
♦ Recording continuity
– Clearly note any intervals in research
♦ Witnessing
– Each page of lab notebook should be:
signed and dated information was recorded
signed and dated by a witness on the date information
was recorded
31
32. Note Keeping:
♦ Recording disclosures to others
♦ Speculation
– Speculation regarding other embodiments of the
invention, possible other uses, etc. should be
recorded as this will assist in sizing up and fleshing
out the invention (speculation could lead to other
inventions)
32
33. When to Patent
♦ The general rule is that one must file a patent application
before an enabling, non-confidential disclosure is made or
before a product is offered for sale
– Printed publications, published patent applications
– Disclosures to other companies, abstracts
– On-line releases of information
♦ Accordingly, a disclosure to another party without a
confidentiality agreement can constitute an enabling
disclosure and may bar patent protection in many
jurisdictions
– Some jurisdictions have limited grace periods, but the
circumstances are very narrow – don’t count on it
33
34. When to Patent
♦ While the US has a limited grace period, don’t count
on it
– It does not prevent a rival patent filing
– You can’t get you priority back in most jurisdictions, and
possibly not even in the US, depending on what was
disclosed
♦ Confidentiality/Material Transfer agreements are
great, but only get you a breach of contract claim
34
35. When to Patent
♦ Another area where there is a problem about enabling
disclosure is talks at conferences
– An oral presentation can be a bar in some countries
– In addition, the dates of abstracts (which are often published
or available on-line before the meeting) and poster session
may be deemed a written disclosure
♦ Another problem area is grant proposals. Once funded,
government organizations publish the abstracts,
sometimes even if you tell them not to without additional
review.
35
37. Due Diligence:
Checklist
♦ I. Intellectual Property Portfolio
– Scope and Status
– Inventorship and Ownership
– Formalities
– Foreign Filing
– Priority Contests/Derivation v. First to Invent & First to File
– Other Related Applications in the Portfolio
♦ II. Actual or Threatened Adverse Proceedings Involving Third
Parties
♦ III. Advice on Freedom to Operate
♦ IV. License or other Agreements with Third Parties
♦ V. Key Personnel
♦ VI. Data 37
38. Due Diligence:
Intellectual Property Portfolio
♦ Scope and Status
– This includes…
a list of all the intellectual property that the target
company owns, controls, or has access to that is
within the scope of the proposed transaction
A list of any 3rd party intellectual property covering
the target company.
Access to the complete file histories of all issued
patents and pending patent applications owned,
controlled, or licensed by the target
38
39. Due Diligence:
Intellectual Property Portfolio
♦ Inventorship and Ownership
– Are you aware of…
Any individual who believes that he or she was
incorrectly omitted from inventorship (consultants,
outside contractors, etc.)
Any claim by a third party that believes it has a right of
ownership in an application or patent
Any inventor who has an obligation to assign to a third
party
Any funding arrangements which would give another
party an interest in the target company’s portfolio
39
40. Due Diligence:
Intellectual Property Portfolio
♦ Formalities
– Account for all documents establishing title-
ownership/licensee rights for all the IP owned,
controlled or licensed by the target company and
establish whether or not…
These IP documents remain in good standing
All assignments were filed and recorded
All filing receipts are in order
Maintenance and other fees have been paid
All relevant applications are pending (i.e., not
abandoned)
40
41. Due Diligence:
Intellectual Property Portfolio
♦ Foreign Filing
– In what jurisdictions have steps been taken to
preserve foreign patent rights?
41
42. Due Diligence:
Intellectual Property Portfolio
♦ Priority Contests
– Are you aware of existing or potential priority contests
involving the claims of the invention?
– In order to assess the outcome of likely priority
contests we need the following:
Evidence of dates of conception and reduction to
practice of invention
Any evidence you have of other parties’ dates of
conception and reduction to practice
42
43. Due Diligence:
Intellectual Property Portfolio
♦ Priority Contests, cont.
– Questions to answer:
What can you tell us about the prior art with
respect to the claims?
What can you tell us about any interferences
past or presently pending?
What can you tell us about any European
oppositions part or presently pending? Is
validity of any of the claims at issue?
43
44. Due Diligence:
Intellectual Property Portfolio
♦ Priority Contests, cont.
– Questions to answer:
What can you tell us about the prior art with
respect to the claims?
What can you tell us about any interferences
part or presently pending?
What can you tell us about any European
oppositions part or presently pending? Is
validity of any of the claims at issue?
44
45. Due Diligence:
Intellectual Property Portfolio
♦ Other Related Applications in the Portfolio
– If any other applications have been filed which would support
the claims, it should be demanded that these applications and
their prosecution histories be viewed.
– In order to assess the patentability of the invention, the
following from other applications which disclose the invention
are needed:
Priority documents
Prosecution files
All known prior art and copies of any prior art searches
Summaries of any new data which might be used to
support the patentability of the claims
45
46. Due Diligence:
Actual / Threatened Adverse Proceedings
♦ Actual or Threatened Adverse Proceedings
Involving Third Parties
– The following information is required:
Information regarding any actual or threatened IP lawsuits
affecting the patent portfolio
Information regarding the legal opinions by external legal
counsel regarding the validity of any third party IP rights that
might affect the patent portfolio
Information regarding the legal opinions by external or internal
counsel regarding whether the activities of any third party
infringe or would infringe on the subject matter of the patent
portfolio.
46
47. Due Diligence:
Freedom to Operate
♦ Advice on Freedom to Operate
– Provide information regarding…
Any potentially dominating patents and, if any,
search results, legal opinions, memoranda, and/or
presentations to senior management regarding the
target company’s freedom to use/test/make their
product within the patent portfolio.
Any trademark clearance searches or survey results
47
48. Due Diligence:
Freedom to Operate
♦ Advice on Freedom to Operate, cont.
– Questions to be answered:
Have you been asked to provide a “freedom to use” opinion
with respect to the practice of the target company’s
product?
Have you formed an opinion on whether the practice of the
target product would infringe a valid claim of a US patent –
can you say why?
Have you ever sent a letter asserting infringement of a
claim of the portfolio?
Are you aware of any related claims or a third party that
would prevent practicing steps of the invention?
48
49. Due Diligence:
License/Other Agreements with Third
Parties
♦ License or Other Agreements with Third
Parties
– Identify all the products in the program – if any
products are not being considered for the deal,
discuss the relationship of these products
– Have any other third parties licensed and
subsequently decided not to pursue this
technology; explain why the program ended
49
50. Due Diligence:
License/Other Agreements with Third
Parties
♦ License or Other Agreements with Third Parties, cont.
– List licenses or other agreements related to the research, development,
manufacture, use or sale of the product, including:
Exclusive and non-exclusive license agreements
Joint development agreements or joint venture agreements
Secrecy / confidentiality agreements
Manufacturing or supply or other service (e.g. testing) agreements
Consulting agreements
Sponsored research agreements
Material transfer agreements
Technical assistance agreements needed to provide for transfer of
“know-how” as to a product that affects the collaboration
Distribution agreements
50
51. Due Diligence:
Key Personnel
♦ Key Personnel
– Provide a list and contact information of all persons
involved in the prosecution of the IP portfolio and/or
R&D of the compounds within the portfolio with
whom we can discuss the proposed transaction.
– Provide documents that establish the obligations of
key personnel, including the inventors. Indicate
whether persons are currently or formerly retained
by the target company.
51
52. Due Diligence:
Data
♦ Data
– Provide the following:
information, including a list and summary description, of all
data relating to completed or ongoing clinical trials, preclinical
studies, toxicology profiles, and proposed future publications
related to product or its use in any field.
Any documents and/or information related to the status and
ownership of clinical trial data and materials identified above.
– Have any clinical trials (or relevant IP) been
funded by third parties, including grants
(academic or government)?
52
53. QUESTIONS?
Maria Laccotripe Zacharakis, Ph.D.
McCarter & English, LLP
617-449-6512
Mzacharakis@mccarter.com
Thomas O. Hoover
McCarter & English, LLP
617-449-6572
Thoover@mccarter.com
53
54. PATENT RIGHTS UNDER GOVERNMENT
CONTRACTS & GRANTS
Daniel J. Kelly
McCarter & English, LLP
Cambridge Innovation Center
March 20, 2013
55. The Bayh-Dole Act – 35 U.S.C. Sections
200-212
♦ Under Bayh-Dole, passed in 1980, small
businesses and nonprofit entities (including
universities and research institutions) given
right to retain title to inventions developed
under Government funding agreements.
55
56. ♦ Bayh-Dole extended by 1983 Presidential
Memorandum to large businesses and for-
profit organizations not subject to DOE, NASA
and NRC funding agreements.
♦ DOE, NASA and NRC are given title by
statute to any inventions developed under
funding agreements between large for-profit
businesses and those agencies; patents
issued to the United States.
56
57. Applies to Government Contracts, Grants,
and Cooperative Agreements
♦ A Contractor’s Patent Rights are Governed by
Part 27 of the Federal Acquisition Regulation
(Title 48 of the CFR) and the Patent Rights
Clause (52.227-11).
♦ A Grantee’s or Funding Recipient’s Patent
Rights Are Governed by Title 37 of the Code
of Federal Regulations and the Patent Rights
clause (Section 401.14).
57
58. Nature of Government’s Right
♦ Government gets a nonexclusive, irrevocable,
paid-up license to practice or have practiced
on its behalf such an invention throughout the
world.
58
59. Fund Recipient Must Act
♦ Under Bayh-Dole – title can revert to the
Government if the grantee/contractor fails to
disclose the invention, fails to elect to retain
title or fails to file and prosecute a patent
application within certain prescribed time
periods. Failure to disclose means
grantee/contractor loses all rights. Failure to
elect title – grantee/contractor still gets
license.
59
60. Definitions
♦ “Invention” (FAR 27.301; 37 CFR 401.2(c))
– any invention or discovery that is or may be
patentable or otherwise protectable under the
Patent laws or any novel variety of plant that is
or may be protectable under the Plant Variety
Protection Act
60
61. Definitions
♦ “Subject Invention” (FAR 27.301; 37 CFR
401.2(d))
– any invention of the contractor conceived or
first actually reduced to practice in the
performance of work under a government
contract or funding arrangement
61
62. Funding Recipient’s Right to Elect Title
♦ Narrow Exceptions to Recipient’s Right to
Elect to Retain Title
– Foreign companies
– Exceptional circumstances in furtherance of
policy objectives
– National security
– Contracts for government owned R&D or
production facilities
FAR 27.302(b)(1)-(4); 37 CFR 401.3(a)
62
63. Government’s Rights if Recipient Elects
Title
♦ Government License Rights
– Minimum: Nonexclusive, nontransferable,
irrevocable, paid-up license to practice, or have
practiced for, or on behalf of, the U.S. Government
throughout the world
– May have additional rights to sublicense to any
foreign government or international organization to
effectuate treaties or international agreements
– March-In Rights
63
64. March-In Rights
Where contractor acquires title, government can
require contractor to license, or the government
may license to others itself:
If Contractor has failed to take adequate steps for
practical application
To alleviate health or safety concerns
To meet requirements for public use
To meet domestic production preference
35 U.S.C. 203; FAR 27.302(f); 37 CFR 401.6;
14(j)
64
65. Failed to Take Adequate Steps
♦ Agencies Permitted to Request Utilization
Reports (FAR 27.302; 37 CFR 401(h).
♦ NIH requires 12 month reporting on stage of
development, date of first commercial sale or
use, number and type of licenses, gross
income, licensing to small business, status of
U.S. manufacturing and identification of any
FDA-approved product names.
65
66. Preference for United States Industry
♦ A Recipient and Exclusive Assignee Must
Agree that Products Embodying Subject
Invention be Manufactured Substantially in the
United States.
♦ Waiver is Permitted On Showing of
Unsuccessful Attempts or Not Commercially
Feasible.
66
67. If Recipient Declines Title . . .
♦ Minimum License Rights to Recipient if
Government Takes Title (FAR 27.301(i); 37
CFR 401.14(e)
– Revocable, nonexclusive, royalty-free license
– Extends to domestic subsidiaries and affiliates
– Includes right to sublicense
– Transferable only with agency approval
– May be revoked or modified by the government
to achieve expeditious practical application
67
68. Procedural Requirements -- Diclosure
♦ Disclosure in writing (FAR 52.227-11(c); 37 CFR
401.14(a)(2))
– Within two months of disclosure by inventor to
recipient’s personnel responsible for patent
matters
– Must identify investor, funding vehicle, sufficient
technical detail and date of any public disclosure
♦ Implications of Failure to Disclose
– Forfeiture of all rights
– Potential liability for Government infringement
68
69. Procedural Requirements – Election to
Retain Title
♦ Recipient must elect in writing to retain title within 2
years of initial disclosure. FAR 52.227-11(c)(2); 37
CFR 14.401-14(c)(2).
♦ Exception for When 35 U.S.C. Section 102(b) 1
Year Statutory Bar Kicks In – Period for Election
Can be Accelerated to No More Than 60 Days Prior
to End of Statutory Period.
♦ Effective 3/16/13, AIA Changes Statutory Bar
Conditions to On-Sale or Public Use Anywhere in
World.
69
70. Procedural Requirements – Filing the
Patent Application
♦ Must File Provisional or Nonprovisional
Application within 1 Year of Election
(Nonprovisional must be within 10 months of
provisional).
♦ If Statutory Bar Applies, Must File within
Statutory Bar.
♦ Foreign filings within 10 months of first U.S.
application .
♦ FAR 52.227-11(c)(3); 37 CFR 401.14(c)(3)
70
71. Effect of AIA “First to File” Rule
♦ Effective March 16, 2013.
♦ As a Practical Matter Collapses Grace Periods
Inherent in Bayh-Dole if Recipient Wants to
Avoid Risk of Intervening Prior Art.
71
72. Inventors and their Recipient Employers
♦ Recipient must obtain written agreement from its
employees to disclose promptly to patent personnel
subject inventions to comply with notice
requirements.
♦ Recipient must require all inventors to execute
papers necessary to file patent applications and
establish the Government’s rights in the inventions.
♦ NIH: This means an obligation to assign title to
federally supported inventions to the Recipient.
♦ FAR 52.227-11(e)(2); 37 CFR 401.14(F)(2);
72
73. A Cautionary Tale: Stanford v. Roche
Molecular Sys., 131 S.Ct. 2188 (2011)
♦ The facts in Stanford
– Stanford researcher Mark Holodniy invented a
procedure for calculating the amount of HIV in
a patient’s blood, which was funded, in part, by
a NIH grant
– Holodniy worked on the invention at Stanford
and at the lab of a private company, Cetus
(predecessor to Roche)
73
74. Facts in Stanford Case
♦ Stanford disclosed the invention to NIH,
pursuant to the Bayh-Dole provisions in the
grant. It elected to retain title, and prosecuted
and obtained patents for the invention.
♦ Roche began manufacturing AIDS test kits
and Stanford sued for infringement.
74
75. ♦ Problem – Holodniy agreed with both Stanford and Cetus
to assign his right to the invention.
♦ Stanford Copyright and Patent Agreement: “I agree to
assign . . . to Stanford . . . that right, title and interest in
and to . . . such inventions as required by Contracts and
Grants”.
♦ Cetus Visitor’s Confidentiality Agreement: “I will assign
and do hereby assign to CETUS my right, title and
interest” in inventions conceived “as a consequence of my
access to CETUS’ facilities or information”.
75
76. ♦ Before case got to Supreme Court, Federal
Circuit found that the Cetus assignment, even
though it came later, trumped the Stanford
assignment.
♦ Supreme Court does not challenge holding
that Cetus, and not Stanford, as a matter of
contract, held rights in the invention.
76
77. ♦ Supreme Court asks to examine whether
Bayh-Dole vests title to federally-funded
inventions in the federal contractor or the
Government, if the contractor fails to obtain an
assignment of rights from inventor employee.
♦ Court says NO.
77
78. ♦ Citing basic precepts of patent law, the Court
finds that inventor, Holodniy, owned and had
exclusive rights to the patent, which he was
free to convey by contract to his employer or a
third party.
♦ Court finds that Stanford’s right to “retain title”
(and by implication the Government’s reverter
rights) did not apply to inventions which had
not been properly assigned by the employee.
78
79. ♦ Court finds that Bayh-Dole invention allocation
scheme only applies to “subject inventions” --
a term defined in statute, FAR and CFR as an
“invention of the contractor”. Court finds that
under U.S. Patent Law a contractor entity has
no rights unless those are assigned by actual
individual inventor.
♦ Government and contractor get no rights in
inventions conceived with federal funds unless
the employee assign the rights.
79
80. ♦ Court finds that the Government does get title
without an assignment under DOE, NASA and
NRC statutes. Court found that exclusive
grant of title in the statute “expressly deprived
[inventors] of their interest.”
80
81. ♦ STRANGE RESULT: Government gets clear
and exclusive title to inventions developed
under DOE, NASA and NRC funding
agreements with large for-profit businesses.
♦ There is no opportunity for Government or
contractor to get title in DOE, NASA and NRC
funding agreements with nonprofits or small
businesses unless the employee inventor
assigns his rights to the contractor or grantee.
81
82. ♦ Take-Away for Contracting Officers and
Companies
– Ensure that all employees have properly
assigned right to inventions to contractor
– Require employees to disclose prior
assignments and closely scrutinize any
agreements with third parties
– Carry due diligence down to subcontractors
and suppliers
82
83. Special Rule for Non-Profits
♦ No Assignments in the United States without Approval
of the Agency (except orgs with primary function of
managing inventions).
♦ Must Share Royalties with Inventor, including Federal
Employee Co-Inventor.
♦ AIA as of 9/16/12: Not required but should give
preference to small business firms as licensees
provided they are “equally as likely to bring the
invention to practical application” as large businesses.
♦ FAR 52.227-11(i); 37 CFR 401.14(k).
83
84. Patent Usage on a Government Contract
♦ A patent holder’s sole remedy for Government
use of a patent or use by someone acting for
the Government is suit against the
Government in the Court of Federal Claims.
28 U.S.C. § 1498
84
85. Patent Usage on a Government Contract
♦ Not considered infringement.
♦ No injunctions, treble damages, court costs, or
attorney fees.
♦ Government may continue usage of the
invention.
♦ Government only liable for “reasonable and
entire compensation,” i.e., a fair licensing fee.
85
86. Patent Usage on a Government Contract
♦ Generally contractors protected from
infringement claims if use authorized
– FAR 52.227-1, Authorization and Consent
♦ Express authorization by Government not
always required to protect contractors from
infringement claims
– Authorization may be implied, e.g., the contract
requires the contractor to use the infringing
method
86
87. Patent Usage on a Government Contract
♦ Indenmification
– The Government can require that the
contractor indemnify it for infringement (FAR
52.227-3)
– This clause is generally included in contracts
for commercial items but excluded from
research and development contracts
87
88. QUESTIONS?
Daniel J. Kelly
McCarter & English, LLP
265 Franklin St.
Boston, MA 02110
617-449-6526
dkelly@mccarter.com
88