© 2001/03 MMO, Developed by Vertex Intellectual Property Strategies Inc. 1 Intellectual Property...

© 2001/03 MMO, Developed by Vertex Intellectual Property Strategies Inc.

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Intellectual Property Licensing and Commercialization Issues

Presented By: J. Gordon Thomson, P.Eng., LL.B.Barrister & Solicitor - Registered Patent Agent

Registered Trademark Agent613 834 6166

[email protected]

With Thanks ToDavid Tyrrell, P.Eng.

Vertex Intellectual Property Strategies Inc.Toronto, Ontario

416 239 [email protected]


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Intellectual Property Licensing and Commercialization Issues

This presentation is only a brief overview of intellectual property law and related issues. Due to its compressed nature, it is not to be relied upon in making specific business decisions. You should

consult with your legal advisor concerning specific issues.

All matter presented here is protected by copyright and all unauthorized reproduction, in whole or in part, is prohibited.


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Intellectual PropertyOverview

© 2001/03 MMO, Developed by Vertex Intellectual Property Strategies Inc. 4

Intellectual Property

Patents – prevents unauthorized use of the functionality of products and processes

Industrial Designs – grants a monopoly to the use of aesthetic aspects of products

Trademarks – protects brand names of products and services from unauthorized use

Copyrights – protects against unauthorized copying

Trade Secrets – protects against unauthorized disclosure


Why Intellectual Property is Important

Intellectual property often represents the most valuable asset of a modern business!


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PATENTS


What is a Patent(Definition)

1. Statutory monopoly to a defined invention granted by statute - the Patent Act



Statutory monopoly to a defined invention granted by statute - the Patent Act

Exclusive right to to make, use, lease and sell the patented invention subject to the right of others




2. Exclusive right to make, use, lease and sell the patented invention subject to the right of others

3. Defined within the scope of the claims of the patent



Statutory monopoly to a defined invention granted by statute - the Patent Act

Exclusive right to make, use, lease and sell the patented invention subject to the right of others

Defined within the scope of the claims of the patent

For a limited period (20 years) from the date of the application






4. For a limited period (20 years) from the date of the application

5. Subject to the rights of others and adjudication






4. For a limited period (20 years) from the date of the application

5. Subject to the rights of others and adjudication

6. It is a right to sue


Prerequisites for Patenting

1. Proper subject matterPatents apply to inventions

Defined in the Patent Act as: any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement thereto.



1. Proper subject matter

2. Novelty (Anticipation)

An invention must be new, novel, never previously disclosed to the public anywhere. Always guard against prior publication or disclosure as it may affect your ability to obtain a patent.




2. Novelty

3. Inventive (Obviousness)

The invention must be inventive! It must be a step forward in the art. It must have ingenuity. It must not be obvious to a person skilled in the art




2. Novelty

3. Inventive

4. Useful The invention must have a useful purpose. It must solve some practical problem. It must deliver what it promises.




2. Novelty

3. Inventive

4. Useful

5. Formalities

The patent application must comply with the rules and regulations set out in the Patent Act.


Time Lines


Public Disclosure

Date of public disclosure (Canada and USA)

Filing Date

12 months

Canada is a “First to File” System

USA is a “First to Invent” System

You have 12 months after public disclosure in Canada and the USA in which to file a patent application

In Europe and most other countries there is no such grace period. Any prior public disclosure will bar the patent


International Filings(Paris Convention)

Domestic Filing Date In Canada or USA

“Patent Pending”

International Filings Including PCT

12 months

Canada is a member of the Paris Convention

You have 12 months after a domestic filing to file in any other member country of the Paris Convention and claim the domestic filing date. This includes a PCT filing.

Permits public disclosure after the domestic filing date in foreign countries


Converting a PPA to an RPA

USPPA Filing Date


Priority Date

RPA Filing Date

12 months

USA permits the filing of Provisional Patent Applications (PPAs). Canada permits the filing of an “incomplete” application which much be completed within 15 months of filing.

The USPPA must be converted in a Regular Patent Application (RPA) within 12 months of filing.

USPPA filing date may serve as Priority Date for RPA if the scope of the USPPA and the RPA are similar.


Obtaining a Filing Date in Canada

Indication that patent being sought. Name and address of applicant (agent). Description of the invention Fees ($200 small entity & $400 large entity) Patent must be complete within 15 months of

the filing date


Prosecution Canada

Filing Date


5 Years to Request Examination

18 months

In Canada, the application remains a secret until 18 months after filing then it is published.

The inventor has 5 years in which to request examination or the application is abandoned ($400SE/$800LE)

PublicationPatent Issues 2-3 years after examination begins ($150SE/$300LE)


Prosecution USA

Filing Date


($US385)

18 months

In USA the inventor may request that the patent application remain unpublished if there is no foreign filing. Otherwise it is published at 18 months from priority date

There is no need to request examination of the patent application. Examination occurs in due course.

It is possible to request “Making Special” for applications related to such things as anti-terrorism and the environment

Publication “Optional”

Patent Issues 2-3 years after filing ($US965)

Examination in due course from filing


Patent Cooperation Treaty

Canada is a member of PCT as are most other nations (approximately 140 member countries, including all major countries)

PCT is a fee deferral mechanism:– Translation fees– Foreign associate fees

Useful when filing in more than 5 countries Filing fees in the range of $3,500 Provides additional time to assess market potential

and business need for patenting


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Patenting Business Considerations


Consider the Business CaseWhat Would You Do?

Why would you patent it? Where would you patent it? How would you plan to exploit

the invention?


Patenting Business Considerations (1 of 3) Why patent

– Easy to copy– Create monopoly

Where to patent– Market research to assess the need and business

opportunity (Projected volumes and price points)– Protection where sold, not necessarily where made

When– Before public disclosure– Within 1 year of public disclosure in Canada and USA


Patenting Business Considerations (2 of 3)

Budget Issues – Inventor’s time from the need to be allocated/budgeted – Typical patent drafting expense is $5,000 to $20,000– Application fees are on a country by country basis– PCT approach can serve to defer expenses– Translation expenses are associated with applications in

some jurisdictions – Regular maintenance fees and increase during the life

of a patent


Patenting Business Considerations (3 of 3)

Alternatives– Trade Secret– Publication

Timelines– Discuss with patent agent / lawyer– Need to understand deadlines

Enforceability


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Patent Ownership Issues


Ownership Issues The Law States

Inventor(s) is (are) first owner(s) of patent All inventors must be named Hired to invent

– Inventions generally belong to employer. Working under contract

– Inventions generally belong to the inventor– Unless the contract states otherwise


Important!

The ownership of future inventions needs to be understood at the outset of a relationship whether the relationship is:– Employee to Employer– Business to Contractor– Business to Business– With a University


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INDUSTRIAL DESIGN


Industrial Design

Definition Shapes, patterns and ornamentation applied to a useful article of manufacture

Examples


Registration Necessary

An industrial design must be registered to be protected

Term of registration is 10 years There is an examination process Gives exclusive right to import, sell, rent an object to

which the design is applied $400 government filing fee $350 renewal fee (after five years) Application includes drawings, photographs and a

verbal description


Registration Prerequisites

Must be original– higher level of originality than copyright

– some intellectual effort and creativity

Must be novel– 1 year disclosure

– not identical with another design or confusingly similar thereto

Must have aesthetic appeal– appealing to the eye


Benefits of Registration

Exclusive right to sell or rent articles using the design

Protects against independent creation Legal remedies to infringement

– 3 year limitation period to commence an action

Marking not necessary but recommended

D Gord Thomson


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Introduction to Licensing


Licensing Overview (1 of 3)

From a business perspective: – Licensing is a discipline that involves the sale and

delivery or transfer of technology from its owner (the licensor) to the licensee, in an agreed upon fashion, with agreed upon rights, for an agreed upon consideration

From a legal perspective:– Licensor provides permission to do something to a

licensee that would otherwise be illegal– Licensee is granted a right that without it – could be

sued



The technology / intellectual property may be in the form or combination of many aspects such as:• Patents

• Trademarks

• Copyrights

• Registered Industrial Designs

• Products, Machines, Processes, Designs

• Trade Secrets / Know-How

• Business or Industry Models



Licensing is not restricted to “high technology”

Know-How or business models can be licensed without an accompanying high technology component (e.g. Tim Horton’s)


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Licensing Considerations


Business Conditions Favouring a Licensing - Out Strategy (1 of 3)

Provide a source of revenue and earnings in markets that are otherwise non-accessible, such as:– Territories where there is no activity, licensing can

provide access to a distant or an international market without a potentially risky capital investment.

– New or different applications for technology that will not create a competitor to the existing or planned business



Can provide an opportunity for growth and the development of a high margin licensing business venture without a capital investment to address the needs of a market where demand exceeds supply

Utilize technologies that have a poor or no fit with the current portfolio and business plan



To obtain benefits from technology grantbacks or improvements

Provide source for development funds and offset cost of major R&D projects

To improve image & meet moral or social obligations; such as providing medical or environmental technologies for wider use & avoiding legislated compulsory licensing


Business Conditions Not Favouring a Licensing-out Strategy (1 of 2)

If the technology is truly a leading technology and greater value can be placed on it by protecting it and retaining confidentially through:– Controlling a market niche with a highly profitable

specialty product

– Retaining price premiums

– Maintaining a currently held major worldwide market share

– Difficult barriers to entry exist


Business Conditions Not Favouring a Licensing-out Strategy (2 of 2)

A potential for high liability exists (e.g. as with hazardous product).

Difficulty in providing an effective delivery and ongoing support due to such factors as:─ Safety

─ Working conditions

─ Distance

─ Availability of appropriate personnel


Technology Valuation Establishing the Fee (Royalty) Basis (1 of 3)

The royalty is the payment or fee paid by the licensee to the licensor

It is generally comprised of an initial lump sum payment and a running royalty (percentage of sales or $per unit)

A license agreement royalty rate depends of many factors and reflects: – Risk involved– Stage of development– Attractiveness of the business opportunity (size of

opportunity, expected profit margins, etc.)



There is no such thing as a typical royalty rate A rule of thumb for the division of profits or the

sharing of cost saving between a licensor and a licensee is:• 20% to 50% for the licensor; 50% to 80% for the

licensee• Royalties generally run at 2% to 10% of gross sales• Lower levels generally apply to the less significant,

older or softer technologies• Higher levels generally apply to the newer,

revolutionary or highly differentiated technologies



Licensors should not approach technology evaluation from a cost of investment perspective

Using industry license agreement experience is risky

The projected license revenue should be evaluated based on the present value of the initial payment and projected royalty stream


A Licensing Relationship is Similar to a Strategic Alliance

A Licensing Relationship like a Strategic Alliance will exhibit the same following characteristics:• Two separate independent entities

• Working together to tackle specific objectives

• Sharing the risk and rewards

• Supplying resources on a continuous basis


Summary

1. Intellectual property assets are crucial to success.

2. Clarify ownership issues up front.3. A Licensor / Licensee relationship is one of a

business partnership focusing on WIN -WIN results.

4. Licensing strategy needs to be meshed with other business plans.

5. Continually audit technologies to understand business strengths and weaknesses and to set an IP management plan.

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