Patent Basics for Emerging Companies Maria Laccotripe Zacharakis, Ph.D. Thomas Hoover Daniel J. Kelly McCarter & English, LLP Cambridge Innovation Center March 20, 2013
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
The Journey of a Patent
Step 1: Discovery! 4
Step 2 Document discovery in lab notebook 5
Step 3 File Invention Disclosure Form with patent committee. 6
Step 4 Patent Committee Discussion Can invention be commercialized? Search for prior art Proceed with patent application 7
Step 5 Preparation of Patent Application Meet with patent attorney Draft application Review and edit application 8
Step 6 File application with patent office 9
Step 7 Review of application by patent examiner 10
Step 8 Rebut the position of the examiner This process goes back and forth several times 11
Step 9 Patent is granted 12
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
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
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
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
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
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
Requirements for patentability Utility Novelty Non-obviousness/Inventive Step Written Description Enablement 19
Requirements for patentability: Utility Invention must have some useful purpose 20
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
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
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
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
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
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
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
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
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
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
Recording conception Note Keeping: 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
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
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
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
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
Due Diligence: Checklist 36
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
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 3 rd 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
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
Due Diligence: Intellectual Property Portfolio Formalities Account for all documents establishing titleownership/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
Due Diligence: Intellectual Property Portfolio Foreign Filing In what jurisdictions have steps been taken to preserve foreign patent rights? 41
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
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
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
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
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
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
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
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
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
Key Personnel Due Diligence: 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
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
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
PATENT RIGHTS UNDER GOVERNMENT CONTRACTS & GRANTS Daniel J. Kelly McCarter & English, LLP Cambridge Innovation Center March 20, 2013
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
Bayh-Dole extended by 1983 Presidential Memorandum to large businesses and forprofit 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
QUESTIONS? Daniel J. Kelly McCarter & English, LLP 265 Franklin St. Boston, MA 02110 617-449-6526 dkelly@mccarter.com 88