E102 January 13, 2009 US Intellectual Property and Licensing Fred Farina Asst. Vice President Office...

E102January 13, 2009

US Intellectual Property and Licensing

Fred FarinaAsst. Vice President

Office of Technology Transfer



• Founded in 1891• ~2,000 students

(900 undergraduate + 1100 graduate)

• 280 professors and 130 research faculty

• 5,300 engineers/scientist at JPL• 32 Nobel Prize Recipients among

faculty and alumni• 72 members of the NAS

• 35 members of the NAE

• $180M in Research Funding

California Institute of Technology


The Jet Propulsion Laboratory

Founded in the 1930’s when Caltech Founded in the 1930’s when Caltech Professor Theodore von Karman Professor Theodore von Karman conducted pioneering work on rocket conducted pioneering work on rocket propulsion.propulsion.

Chartered to Conduct Unmanned Chartered to Conduct Unmanned Robotic Exploration of the Solar SystemRobotic Exploration of the Solar System

Federally Funded R&D NASA Facility Federally Funded R&D NASA Facility operated by the Caltechoperated by the Caltech

Annual Budget - Over $1 BillionAnnual Budget - Over $1 Billion

5200 Employees5200 Employees 1/3 PhDs, 1/3 MS, 1/3 BS & Other1/3 PhDs, 1/3 MS, 1/3 BS & Other

Smart Lander Sample Return

Bulldozer

Mars Express

Smart Rover

Reconnaissance Orbiter

MarsMars


Scientists Invent in Research Labs

Invention Disclosuresto Technology Transfer Office

Evaluation of Inventions/Patent Filing Decisions

Technology Licensing

Startup CreationEstablished Company

OTT’sActivities


Start-up Report for the Past Decade (1995-2005)

Definition of Start-up*:

License to Caltech IP Caltech has equity interest prior to series A Company had to raise not less than $500K

* Definition more selective than previous years


Categories

• AS = Asset Sale A sale of Company for less than FMV• T = Terminated Inactive, IP returned• F = Failed Liquidated, IP no longer utilized

• ACQ = Acquisition IP acquired, shares sold by CIT• IPO = IPO Public company (IPO)

• ACT = Active In prototype devpmnt or prods. sales


Number of Start-ups: 78(over 100 using looser definition)

37% VC backed 3Fs, Angels, Small Independent Investors, Small

Public Companies


0

10

20

30

40

50

AS+T+F ACQ+IPO ACT

Failed

Success

ACT

• AS = 5• T= 5• F= 8

• ACQ =12• IPO= 5

• ACT =43

23% 22%

55%


Interesting Facts

Companies with products in marketplace: 23

Companies w/ sales > $1M/yr: 13 (8 w/ royalty obligations)

14% of Companies do not use the licensed technology


Category ACT (43)

8 companies with significant upside potential 16% outside of California 53% in Pasadena Total # of employees > 1,000 # of employees in Pasadena > 500 Much higher number if incl. IPO + ACQ


Caltech OTT in Tech Transfer Elite

A Global Analysis of University Biotechnology Transfer and Commercialization, includes the Milken Institute university Technology Transfer and Commercialization Index, which ranks universities at their ability to take world-class research and turn it into licensing income and business startups.

The top five are:1. Massachusetts Institute of Technology 2. University of California system 3. California Institute of Technology 4. Stanford University 5. University of Florida


Caltech OTT in Tech Transfer Elite

Five Universities You Can Do Business WithFrom: Inc. Magazine, February 2006

“ … Just five schools, in fact, constitute the elite of the technology transfer world. They are Berkeley, Caltech, Stanford, MIT, and Wisconsin. The list of universities reporting new discoveries changes from one year to the next, but each of these five schools consistently garners around 100 patents per year.”

“… Along with teaching and doing research, they seem to be in the business of inventing companies.”

“… Administrators at the Big Five play their part in nurturing tech transfer by resisting the temptation to monitor and regulate business relationships aggressively.”


Portable Inexpensive Personal Medicine Devices (Scherer)


Dendrimer Nanotechnology for Water Purification (Diallo)


Remote Measurement of Cardiac Waveforms (McGrath, JPL)


New CFx Batteries: Primary and Rechargeable (Yazami)


Micropumps for Chip Cooling & Biomed. Apps. (Gharib)


Eye-Predict (Koch)


Real-Time Micro-Arrays (Hassibi)



Intellectual Property Primer

• Patents

• Copyright

• Trade Secret

• Trademarks

• Trade Dress


US Patent Laws and Regulations

• 35 USC

• 37 CFR

• MPEP

“The Congress shall have power … To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries…” U.S. Constitution, Article I, Section 8


For the Patentee:

Reward the Patentee with the right to exclude others from making, using, selling, offering to sell, in the US, or importing into the US, the patented invention.

US Patent’s Main Purposes


For Society:

Put the public in intellectual possession of the invention so that it can (1) benefit from the invention after the patent has expired, (2) improve on the invention, and (3) design around the claims

US Patent’s Main Purposes


The right to exclude others from making, using, offering for sale or selling the invention.

What is a Patent?


The right to make, use, offer for sale or sell the patented invention.

What a Patent is NOT


• Inventor = One who conceived the claimed invention

(Not one who merely reduces the invention to practice).

Inventorship


• Inventor owns her/his inventions

• However, Universities/Companies have employees sign Patent Agreement = Obligation to assign inventions to employer.

Ownership of Inventions/Patents


• A process (software, chemical process)• A machine (photocopier)• An article of manufacture (laser)• A composition of matter (chemicals, isolated genes)

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 USC § 101

What is Patentable?


An Invention Must Be…

• Useful• Novel• Nonobvious

… to be patentable.


• Provisional• Nonprovisional (utility)

• Plant • Design

Types of Patents


• 1 year pendency• Never Issue• No Claims Required• Meet requirements of 35 USC § 112

Provisional Patent Applications


Anywhere•Printed Publication• Patented

In the U.S. • On sale / Offered for Sale• In Public Use

These events, if they occur more than one year before filing, create a Statutory Bar:

35 USC § 102(b)

Statutory Bars


• First to File• Paris Convention• Patent Cooperation Treaty (PCT)• Can be filed within 1 year of priority

Patenting Outside the US


• Drawing(s) (only required if necessary to understand the invention)

• Specification (description of the invention)

• Claim(s) (define intellectual property/scope of patent)

Patent Application


• Title of the Invention• Cross Reference to related applications (if any)• Statement of federally sponsorship• Background of the Invention• Brief Summary of the Invention• Brief description of drawing(s) (if any)• Detailed Description of the Invention•Abstract of the disclosure•Sequence listing (if any)

The Specification


• Written Description

• Enablement

• Best Mode

35 USC § 112, ¶ 1

Specification Requirement


1. A method for identifying a chemical analyte, wherein said chemical analyte is a biomolecule, using a sensor array, said method comprising:

(a) providing a sensor array, wherein each sensor comprises a conductive region and a nonconductive organic polymer region;

(b) contacting said biomolecule with said sensor array to produce a response; and

(c) analyzing said response thereby identifying said biomolecule. measuring apparatus.

U.S. Patent 6,331,244 to Lewis , et al.

Claims


• Conception• Reduction to Practice

(actual or constructive)• Filing Application• Office Action (rejection)• Response• Allowance

The Patent Process


U.S. Filing

Office Action

Response

Final Office Action

Appeal

Patent Issues

Priority Filing(e.g.,

provisional)

Publication at 18 months

Patent Prosecution


Government Publications•35 United States Code (35 USC)

(http://www.access.gpo.gov/uscode/title35/title35.html)•37 Code of Federal Regulations (37 CFR)

(see Appendix R of the MPEP below)•Manual of Patent Examination Procedure (MPEP)

(http://www.uspto.gov/web/offices/pac/mpep/mpep.htm)

Key Web Sites•http://www.uspto.gov•http://www.european-patent-office.org•http://www.law.emory.edu/fedcircuit/

Court decisions by the U.S. Court of Appeals, Federal Circuit

Patent Resources


Prospective licensee evaluates technology, (under NDA if necessary) Licensee expresses willingness to undertake commercialization of invention Negotiation of terms of the licenseBoilerplate agreement provides legal framework of the agreement Closing the deal Managing the relationship with the licensee

The Licensing Process


Upfront fees Minimums Royalty rate Equity Diligence and Milestones Patent Costs

Main Terms Subject to Negotiations


Special case of the Option: An option gives the right to acquire a license during the option period

Exclusive: agreement not to grant further licenses.

May be limited time, territory and field

Implied obligation to exploit

Nonexclusive: licensor may grant other licenses

Types of License Agreements


A License is an enforceable contract

Licensor waves its right to exclude licensee to make, use or sell patented invention, in exchange for consideration (usually financial)

Can be based on patents, know-how or combination

What is a License


• Preamble:

Identify the parties

Effective date

Anatomy of a License


• Definitions:

Defines terms essential to the agreement

Avoids ambiguity from inaccurate repetition

Aids in achieving conciseness and clarity



• Grant:

Character of license: exclusive, non-exclusive

Make, use, sell, offer for sale, Import: separable rights

Licensed Patents Rights



• Grant (cont’d):

Geographic scope of license grant

Term of the grant (implied life of patents)

Right to sublicense (must be explicit)



• Patent Prosecutions and Patent Costs:

Responsible party to prosecuting patent apps.

Payment of patent costs

Schedule for reimbursement of patent costs



• Royalty:

Consideration for the license

Upfront fees

Royalty rate (e.g., percentage of sales)

Minimum annual royalty

Escalation provision

Paid-up



• Equity Interest:

Startups only

Number of shares of common stock, or percentage of total number



• Due Diligence:

Minimum standard effort to to commercialize

Milestones: funding level deadline for first commercial sale Minimum annual sales



• Royalty Reporting:

Record keeping

Audit of records: licensor entitled to audit

Reports by licensee of royalties due (periodic, provide payment at time of report, post-termination report)



• Infringement by Third Party:

Nonexclusive licensee: No right to bring suit on its own

Exclusive licensee

May bring suit on its own

Licensor is indispensable party



• Term and Termination:

Absent term: life of patents

Termination on breach Material breach only to heart of agreement Notice and cure period Automatic vs. second notice Licensee termination without cause (minimums)



• Net Present Value and other calculations Complicated Unreliable Crystal ball often more effective

• Early stage: many unknowns by definition

Determining the Value of an Invnetion


• The market drives the value• IP is worth whatever a buyer is willing to pay for it

Negotiation

Determining the Value of an Invnetion


Rule of thumb: a share of 25% of profits for the licensor is generally accepted as reasonableHowever, using profits as a basis for royalties is problematic (many accounting ways of representing costs)Net sales are commonly used as basis for royalty payments (e.g., 4% of net sales).

Royalty Rate Determination


Licensees know best their profit margin When negotiating, let licensee make first offer U.S. courts have awarded royalty rates varying from 2 % to 20% of the selling price of infringing products

Royalty Rate Determination

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E102 January 13, 2009 US Intellectual Property and Licensing Fred Farina Asst. Vice President Office...

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