How To Secure Funding & Protect Intellectual Property For Life Sciences

How To Secure Funding & Protect Intellectual Property

For Life Sciences

About AppFolio SecureDocs

AppFolio SecureDocs is a virtual data room for sharing and

storing sensitive documents both internally and with outside

parties.

AppFolio, Inc. Company Basics:

• Founded by the team that created and launched GoToMyPC and

GoToMeeting

• Backed by leading technology companies and investors

• Web-based business software for financial and legal professionals

About One3IP Management

• One3 IP Management is an intellectual property management company that acts as your in-house IP counsel handling all of your company’s IP, licensing and other legal needs.

• One3 IP views its clients as partners and does not nickel and dime them for every task, but works with its clients in a cost effective manner that allows One3 IP to learn and stay abreast of its clients current and future business needs and goals.

• One3 IP does not follow the status quo in building its clients value through the obtainment of a broad patent portfolio and the protection of its clients trade secrets, but has developed novel methods that are cost effective and result in an IP portfolio that provides broad protection.

About Peter Weinstein, Ph.D., J.D.

• Nearly a decade as a scientist post Ph.D., including time at NIH, USAMRIID and as a Sr. Scientist at ImmuCell

• Former Patent Examiner at the USPTO

• Nearly a decade in private practice as a patent and general civil litigator and patent prosecutor

• Six years at Baxter Healthcare (Sr. Counsel, IP)

• Founder One3 IP Management

What is IP

• Intellectual Property is property that results from original creative thought.

• Generally, there are two types of Intellectual Property • Patents

• The exclusive right granted by a government to an inventor to manufacture, use, or sell an invention for a certain number of years.

• Trade Secrets• A secret process, technique, method, list, etc., used to advantage in

a trade, business, profession, etc.

Patents

Value Of A Patent

• A patent has multiple uses• Protect your invention

• Keep competitors from making, using or selling your invention

• Raise revenue through licenses

• Tender offers

Poll Question No. 1

The Major Myths About Patents And Patenting

In 2008, three prominent U.S. IP professors published a survey containing information gathered from over 10,000 companies in the software-internet, biotechnology, and medical device sectors. The survey results showed that many myths have arisen to support a company’s decision to not adequately protect their IP.

Competitors Could Invent Around Patent

Believed Technology Was Not Patentable

Financial Cost of Getting A Patent

45

38

57

Percent of Responders

Poll Question No. 2

The Status Quo

• Your company, university, or research institution has been told to follow the status quo methods to obtain a patent:

– hire an outside patent attorney whose job is to prepare patent applications based solely on the data provided by your scientists

– to prosecute the patent application to obtain claims covering the invention described by the data

– to file paper after paper in response to rejections from the patent office

– while paying high fees and taking many years to get a patent

– In spite of this, most companies fail to adequately protect their technology

The status quo is costly, time consuming, inefficient and frequently results in a low value return

Break Out Of The Mold

There is a Better Way

• Broadly covers your invention in a manner that you not only cover the use of your company’s technology in its research and development space, but that of your competitors and areas you can license

• Take advantage of opportunities to make patent prosecution more streamlined and efficient.

– Prosecute your patent application in a more efficient and cost effective manner that not only saves, time and money, but results in broader patent coverage.

• Proactively Executed Prosecution (“PEP”)

– Provides ability to “horse-trade” with Examine

– Patent Prosecution Highway (“PPH”)

Break Out Of The Mold

Comprehensive Patent Application

• Prepare broadly

• Include lists

• Molecules (all proteins, metals, drugs, composites, etc.), concentrations, time, uses, components, etc.

• Use prophetic examples

• Can enter data in U.S. and EP after file in support of claims

• Prepare comprehensive set of claims

• EP file in Specification; U.S. file and cancel with Prelim. Amendment

• A cookbook, not a story book

Proactively Executed Prosecution

How PEP Works

• File applications at earliest opportunity

• Quickly start prosecution in U.S.

• Take advantage of face-to-face interviewing opportunities as soon as possible

• Result: Obtain first patent quickly!

• Put the issued U.S. patent into the “Patent Prosecution Highway” and expedite prosecution to move your patent quickly around the world

– File in countries that add value (sell, manufacture, tender)

• Perfect your “Patent Estate Architecture” by obtaining additional patents in the U.S. by adding claim elements that are common components of your invention

Poll Question No. 3

Trade Secrets

Basics of Trade Secret Protection

According to the FBI, a trade secret is: Information with independent economic value, like blueprints, chemical formulas, research and

development, marketing strategies, and manufacturing processes that the owner has taken reasonable steps to keep confidential.

According to federal law, a trade secret is: (1) information; (2) reasonable measures taken to protect the information; and (3) which derives

independent economic value from not being publicly known.

According to California state law Section 3426.1(d), a trade secret is: information, including a formula, pattern, compilation, program, device, method, technique, or

process, that: (1) Derives independent economic value, actual or potential, from

not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.


• In evaluating what is a trade secret, these factors are analyzed:

– The extent to which the information is known outside the claimant's business– The extent to which it is known by employees and others involved in the business– The extent of measures taken by the claimant to guard the secrecy of the information– The value of the information to the business and its competitors– The amount of effort or money expended by the business in developing the information– The ease or difficulty with which the information could be properly acquired or

duplicated by others


Corporate documents include:

•Patents and Trade Secrets•Customer Acquisition Costs•Lifetime Value Assumptions•Product Road Map•Profitability by Product and Customer•Cash Flow, Burn Rate, Financial Models, Margins•Client Lists and Contracts•Overseas Manufacturing, Trials, Supply Chain

= all the information a current or new competitor would need to follow your company’s path to profitability

Corporate Documents Represent Your Company’s “Treasure Map” to Profitability


California follows the Uniform Trade Secret Act The UTSA is followed by 46 states Only Massachusetts, New York, North Carolina and Texas do not follow the

UTSA California trade secret law is codified in Civil Code Sections 3426-3426.11

Prosecutes “misappropriation” of a trade secret. Damages available

May enjoin the party misappropriating the trade secret. Recover damages for actual loss caused by misappropriation.

Statute of limitation Three (3) years following discovery of misappropriation or three (3) years

from when should have reasonably discovered misappropriation.


In 1996, the federal government passed the “Economic Espionage Act.” There are two main provisions:

The first, 18 U.S.C. § 1831(a), criminalizes the misappropriation of trade secrets (including conspiracy to misappropriate trade secrets and the subsequent acquisition of such misappropriated trade secrets) with the knowledge or intent that the theft will benefit a foreign power.

Penalties for violation are fines of up to US$500,000 per offense and imprisonment of up to 15 years for individuals, and fines of up to US$10 million for organizations.

The second section, 18 U.S.C. § 1832, criminalizes the misappropriation of trade secrets related to or included in a product that is produced for or placed in interstate (including international) commerce, with the knowledge or intent that the misappropriation will injure the owner of the trade secret.

Penalties for violation of section 1832 are imprisonment for up to 10 years for individuals (no fines) and fines of up to US$5 million for organizations.

http://en.wikipedia.org/wiki/Title_18_of_the_United_States_Code

http://www.law.cornell.edu/uscode/18/1831(a).html

http://en.wikipedia.org/wiki/Title_18_of_the_United_States_Code

http://www.law.cornell.edu/uscode/18/1832.html


In 1996, the federal government passed the “Economic Espionage Act.” Economic espionage can be committed by a U.S. citizen, but under United States law,

foreign nationals can also be prosecuted if their actions hurt U.S. citizens or the United States in general.

Economic espionage can entail stealing an idea or product, or simply conspiring to do so. This law was designed to protect the proprietary secrets, products and information developed by businesspeople from being exploited by others without compensation.

The Act authorizes civil proceedings by the Department of Justice to enjoin violations of the Act, but does not create a private cause of action. Thus, victims or putative victims must work with the U.S. Attorney in order to obtain an injunction.

Unlike the Espionage Act of 1917, which is governed by Title 18 U.S. Code Sections 792 - 799, the offense involves commercial information, not classified or national defense information.

http://en.wikipedia.org/wiki/Espionage_Act_of_1917


Theft by Employees Prosecuted Under State T.S. Law FUHU v. Toys R’Us

TRU sold FUHU Nabi children’s table for several years. FUHU provided confidential information regarding Nabi 2 tablet in the summer of 2012. In the fall of 2012, TRU released its own children’s tablet called “Tabeo.” FUHI filed suit alleging theft of trade secrets.

Tekmira v. Alnylam

The companies were partners for many years with Alnylan providing lipid nano particle delivery technology and product to Tekmira, a company developing iRNA therapies.

Tekmira alleged that Alnylan attempted to copy Alnylan methods for its own use and also shared Tekmira technology with a third party without Tekmira’s consent.

Side note, Alnylam provided over $45 million in funding, including equity purchases to Tekmira and $6 million in manufacturing related funding prior to the lawsuit.



General Concept of T.S. Law The key is to show that you have made a concerted effort to identify and protect your trade

secrets

The implementation of a “Know-How” database

Secure location for documents Limited access Can retrieve many years later Can use with a partner

Poll Question No. 4


Companies must share information internally and externally on a regular basis:

•Investor communication/board meetings•Fundraising•Audits (409A, 401K)•Client contracts, licensing, partnerships•Collaborative R&D, IP development•Legal review•Consultant collaboration

Companies must balance the need to share information while mitigating the risk of exposing their treasure map


SecureDocs—Real World Uses• R & D Collaborations can result in transfer of trade secrets prior to filing of a

patent application

• How are these trade secrets protected?

• Need to satisfy legal standard for protection

• How are you protected in the future?

• People leave, documents lost, emails deleted, memories fade

• Trade Secret/Know-How database

• Technology has advanced to the point where all documents and information can be stored for a reasonable price electronically

• Can set up own, but require IT support and purchase hardware

• Cost is in the $10,000’s

Financing The Growth Stage Life Science Company

Sources of Financing

• Venture Capital• Angels• Strategic • Government Grants• Leasing• Banks


• Angels• Equity• Very patient (sometimes altruistic motive)• Small dollars• Limited Headroom• May have friends


• Venture Capital• Equity• Sophisticated and understand long term needs• Understand space and have a network• Many are bargain hunters• If performance is not there, will replace

founders/management• Not patient


• Government Grants • Straight cash infusion; no equity dilution• Limited involvement• Can lead to repeat funding• Long lead time• ….Long lead time• Some additional administration cost


• Leasing• No dilution, less expensive than equity• Focused on equipment purchased• Usually very familiar with vendor• Require repayment• Need positive cash flow unless it is a venture leasing

firm


• Banks• No equity; least expensive• Offer long term debt or lines of credit• Sophisticated but have many requirements• Need positive cash flow and may require personal

guarantee• Venture banks are an interesting alternative


Financing Matrix

Stage Angels Venture Strategic Grants Leasing Banks

Start-up ✔ ✔R&D ✔ ✔ ✔ ✔Revenue ✔ ✔ ✔ ✔Positive Cash Flow

✔ ✔ ✔ ✔ ✔

Growth ✔ ✔ ✔ ✔ ✔

Contact UsAppFolio SecureDocs

50 Castilian Drive

Goleta, CA 93117

Phone: (866) 700-7975

[email protected]

[email protected]

www.securedocs.com

@SecureDocsVDR

One3IP Management

1560-1 Newbury Road, #327

Newbury Park, CA 91320

Phone: (800) 478-2152

[email protected]

[email protected]

www.one3ip.com

@one3ip

mailto:[email protected]


http://www.securedocs.com/



http://www.one3ip.com/

Thank You!

Confidential ©2012 AppFolio, Inc.