Technology Commercialization:

a bit of a primer on IP and some thoughts about value

Richard CoxOffice of Technology Transfer

January 25, 2011

Evolution of the relative value of tangible and intangible assets to total corporate value

75 - 100 years ago, tangible assets generally accounted for 90+% of a company’s value . . .

90%

10%

Today, many companies’ value is derived from their intangible assets.

100 years ago Today

Patents, Copyrights, Trademarks, & Trade Secrets

Patents• Utility patents – covers machines, manufactured articles,

compositions of matter, processes, any new and useful improvement of these things.

• Right to exclude. . .not an affirmative right to practice

• Term – 20 years from filing– 21 years if first file provisional patent application

• Estimated costs – PPA: $110, Utility: $8,000 - $25,000• Effect of public disclosure - US system vs rest of world

– US – 1 year grace period– Everywhere else – absolute novelty

Patents (cont.)

• Test for patentability – new, useful, non-obvious• Ownership follows inventorship – employees are

usually contractually obligated to assign their rights to employer

• Inventors are inventors and no one else – conception of idea and reduction to practice

• Research exemption to infringement (?)

Patent issues to watch for

• Conveyance of title– from all inventors, no competing claims on IP

rights

• Completeness of patent portfolio– divisionals, CIPs, continuations, foreign

counterparts, terminal disclaimers

• Coverage of claims– a well-challenged patent is a strong(er) patent

Copyrights• Original works of authorship fixed in a tangible

medium of expression – protects the expression of the idea, not the idea itself.

• No exclusionary right against independent creation.• Authors have certain exclusive rights – make and

distribute copies, make derivative works, display and perform the work publicly.

• Fair use exception – subjective, no bright line test

Copyrights (cont.)

• Works are “born” copyrighted, no requirement to register – registration helps enforcement

• Term of copyright – life of author plus 50 years• Different rules for works created before 1/1/78• “Works for hire” – authorship remains with

employer, term is shorter of 100 years from creation or 75 years from publication.

Copyright issues to watch for

• Acknowledge/identify ALL authors• “Work for hire” contracts to assure ownership

rights• Authors have a duty to account to each other

Trademarks & Service Marks

• Word, phrase, symbol, sound, color, smell, or combination that identifies source of goods or services

• Establishes an expectation of quality• Rights arise out of use – extent of use determines

extent of rights– Protects against use of similar marks on similar

products

Trademarks (cont.)

• Strongest marks are fanciful/coined or suggestive marks– Descriptive marks are weak/not allowed

• Registration not required, but probably advisable– Federal registration – requires intent to use– State registration – requires actual use

• Cost – a few hundred to a few thousand $– $375 per class of goods

Trademark issues to watch for

• Perform professional trademark search prior to registration– helps prevent claims of willful infringement

• Unlimited life IF maintained– Federal and state renewal requirements different

• Enforcement – prevent trademark from becoming generic term for

the class of products – elevator, thermos, aspirin vs Kleenex, Xerox, Polaroid

Trade Secrets

• Confidential/proprietary information– that is not generally known (i.e. – is secret) – that is maintained as a secret using reasonable

measures– that provides economic benefit

• Covers virtually all types of information– Formulae, customer lists, recipes, processes, etc.

• Does not prevent independent discovery or reverse engineering by competitors

Trade Secret issues to watch for• Must assertively identify, secure, and maintain

confidentiality of protected information• Inadvertent disclosure is not a defense• Unlimited life IF maintained• Enforcement – Limit access to protected information– Employee awareness, confidentiality agreements– Proactive enforcement (eg. - employee turnover)– Injunction vs damages

Technology Commercialization

- some thoughts about goals, and factors affecting our ability to reach those

goals

The Brass Ring

• Signed license agreement• With up-front $$/equity, and• Solid diligence requirements, and• Commitment for royalties on sales, and• With sponsored research commitment

• Healthy working relationship with licensee• Channel to market for future technologies

Identify/Quantify the Real Benefits• As consumers, we buy benefits, not

products, not science• What are the benefits?• Where can they be applied? • Who cares?

• Quantify the benefits for each application• How much better/faster/cheaper?

What do we mean by value?

• Value has little to do with cost• Value changes – often suddenly, often

dramatically• To licensor (seller) – what they’re willing to

take for the technology• To licensee (buyer) – what they’re willing to

give for the technology• True value – terms the parties agree upon to

do the deal at that time

Factors affecting value

• Technology factors• Stage of development• Availability of resources for R&D

• Personnel, facilities, equipment, materials• Market factors

• Market size/income potential • Competitors

• Regulatory factors• FDA, USDA, EPA, OSHA, etc.

Factors affecting value (cont.)

• Licensing factors• Degree of exclusivity requested/required• Fields of use• Other limiting factors

• Geographic territories selected/assigned• Rights to sublicense• Royalty-stacking• Cross-licensing