Patent Basics for Emerging Companies

Patent Basics for Emerging Companies

Maria Laccotripe Zacharakis, Ph.D.

Thomas Hoover

Daniel J. Kelly

McCarter & English, LLP

Cambridge Innovation Center

March 20, 2013

Introduction to Intellectual Property

BOSTON // HARTFORD // NEW YORK // NEWARK // STAMFORD // PHILADELPHIA // WILMINGTON


Thomas O. Hoover McCarter & English, LLP


March 20, 2013

The

Journey

of a

Patent

4

Step 1:

Discovery!

5

Step 2

Document discovery in lab notebook

6

Step 3

File Invention Disclosure Form with patent

committee.

7

Step 4

Patent Committee Discussion

Can invention be commercialized?

Search for prior art

Proceed with patent application

8

Step 5

Preparation of Patent Application

Meet with patent attorney Draft application Review and edit application

9

Step 6

File application with patent office

10

Step 7

Review of application by patent

examiner

11

Step 8

Rebut the position of the examiner

This process goes back and

forth several times

12

Step 9

Patent is granted

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.”

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

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)

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.

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.

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.

19

Requirements for patentability

♦ Utility

♦ Novelty

♦ Non-obviousness/Inventive Step

♦ Written Description

♦ Enablement

20

Requirements for patentability:

Utility

♦ Invention must have some useful

purpose

21


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

22


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

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

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)

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

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

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

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.

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

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.

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

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)

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

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

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.

36

Due Diligence:

Checklist

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

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

39

Due Diligence:


♦ 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

40

Due Diligence:


♦ 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)

41

Due Diligence:


♦ Foreign Filing

– In what jurisdictions have steps been taken to

preserve foreign patent rights?

42

Due Diligence:


♦ 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

43

Due Diligence:


♦ 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?

44

Due Diligence:


♦ 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?

45

Due Diligence:


♦ 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

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.

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

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?

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

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

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.

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)?

QUESTIONS?



617-449-6512

[email protected]

Thomas O. Hoover


617-449-6572

[email protected]

53

mailto:[email protected]

mailto:[email protected]

PATENT RIGHTS UNDER GOVERNMENT

CONTRACTS & GRANTS

Daniel J. Kelly



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.

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.

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

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.

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

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)

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.

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”.

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.

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.

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.

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.

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.”

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.

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

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


♦ 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


♦ 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


♦ 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


265 Franklin St.

Boston, MA 02110

617-449-6526

[email protected]

88