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WIPO-INSME INTERNATIONAL TRAINING PROGRAM ON THE ROLE OF INTELLECTUAL PROPERTY IN RAISING FINANCE BY SMALL AND MEDIUM-SIZED ENTERPRISES
Theme 3 Strategic Use of Intellectual Capital: IP Audits and Leveraging IP Assets in Business Strategy
Jeremy Lack Geneva, 11.7.06
Medabiotech Quadrant Chambers Etude Ziegler, Poncet. Grumbach, Carrad, Luscher
jlack@lawtech.ch
NB. These notes are intended for general information only. They contain inaccuracies and should not be relied on as a substitute for advice of counsel. They are provided to WIPO-INSME students solely as reference materials. They may not be copied, used or disseminated without the express written consent of the author. All rights reserved. 1
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Agenda
Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR
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SMEs are entrepreneurial catalysts for innovation. IP Aligns the Interests of Science/Technology, Finance and Industry
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Traditional IP Stakeholders
Inventors Authors
Companies
Universities
Governments
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Regulators
Companies
Start-ups
VCs Investors
Financial Institutions
Universities
Banks
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Agenda
Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR
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1. Is there valid IP here? 2. Who does it belong to? 3. Am I free to use it? 4. How can I protect it?
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Patents Trademarks
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Automatically (e.g., ) By use (e.g., , EU designs) By actions (e.g., trade secrets) By nature of investments (e.g., databases) By registration (e.g., patents, , designs)
This variety of ways creates confusion and a general lack of awareness of IP assets, which many companies may be wasting.
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$880
$40
$120
$90
$260
Clinical 7 yrs
Biology 3 years
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PriceWaterhouseCoopers How appropriate is our system developed for a world in which physical assets predominated for an economy in which value increasingly is embodied in ideas rather than tangible capital? Alan Greenspan April 4, 2003
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Agenda
Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR
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EXIT TO SUCCESS!
Strategic partnerships
Management/Structure of company
Business plan
Seed funding Invention
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Protection of invention
Start-up creation
EXIT TO SUCCESS!
Management/Structure of company
Business plan
Seed funding Invention
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Protection of invention
Start-up creation
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Overall
No one-size fits all solution: you need to innovate with your IP as well Each strategy will be person, time and industry-specific (e.g., Intel at first Intel today) Think it through: costs and timing issues What are your most important IP rights? What are your cash needs? What are your greatest concerns (SWOT analysis)?
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Key personnel Ownership rights Holding of IP Budgeting over time (e.g., 5 + 5 + 5 rule) When to file? Who to use? Creating libraries Benchmarking prior art
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Unanimity is required for any transfer of rights to take place, such as the grant of a nonexclusive license (e.g. CH, UK, JP)
3.
All Countries sole co-owner cannot grant exclusivity: Unanimity always necessary to grant exclusive
licenses or assign rights. NB: Can be dangerous if not all inventors are listed and validity remains unaffected (e.g., CH).
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IP Geographical Considerations
Where to Register Where to Protect Where to Own Your IP
Where are you based? Where is competitor based? What are your most important markets (by volume, by profits)? What are countries of threat? Timing and likelihood of success? Ease & costs of enforcement?
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Set up an internal system so that whenever an employee comes up with an invention, there is a reporting and communication system that exists and captures key dates and information. Best practice is to use Invention Disclosure Forms (a) Do a search (b) Summarize invention in view of prior art (c) Think of applications for your invention (d) Think of how other will try to design Drawings around or copy it Figures
Related art(*)
BLOCKS SHOW KEY ISSUES TO BE COVERED ON AN INVENTION DISCLOSURE FORM: Contributors Signatures (*) NB include prior uses of the invention; conferences, offers to sell
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Dates
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IP rights are seldom mutually exclusive. Think of them over time and collectively. Best formula is to generate synergies (e.g., Design + TM). Some examples:
COPYRIGHT + KNOW-HOW (=TS): Almost always there. License together. PATENT + TRADEMARK: e.g., Patent only in G8 countries, but TM worldwide (all Madrid Protocol) . NB: TMs over the long term can be worth more dont expire! DOMAIN NAME + TRADEMARK: Recommended in (almost) 100% of cases. TRADE SECRET + TRADEMARK: Dont disclose the secret but build up the brand (e.g., 7X). Describe results of TS but not the how. COPYRIGHTS + TRADE SECRET: E.g of software: license and restrict access to source code. Program protection: have auto-delete if source code is breached. COPYRIGHT + TRADEMARK: Very common in entertainment industry. E.g., HARRY POTTER COPYRIGHT + DESIGN + UTILITY MODEL: Very common in Europe. PATENT + TRADE SECRET: All patents start as TS, but you can still separate e.g., product (patented) from process (kept as trade secret). But be careful of US Best Mode issues. Also beware of invalidity that may result from misleading indications in patent application. COPYRIGHTS + 3D TRADEMARK + BRAND NAME TRADEMARK + DESIGNS + UTILITY PATENT: Why not? Is often done.
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LEGAL APPROACH: Reliance on National Laws All company employees are bound by duties of secrecy with respect to their activities. All relevant IP belongs to the employer. This may have criminal law sanctions. There also exist non-compete contract clauses.
But Compliance is Not Enough: You Need to Shift Your Companys Awareness
HIGH
Future
BUSINESS
Today
LEGAL
(policies, reporting, IP reporting systems)
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SOME BASIC QUESTIONS: 1 - What are your most important IP rights? 2 What are your greatest future interests and concerns? 3 What would your competitors like to know about you?
4 What are your main trade secrets ? Are they sufficiently understood, identified and protected?
5 What do you want to protect & how can this be done? 6 What feels right in your local culture? 7 How often is IP included in your regular reports?
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Commercial Industrial Property (e.g., Copyrights, Trademarks, Designs, Commercial Trade Secrets)
TRADE SECRETS
Expanding The Outer Square
BUSINESS APPROACH
Given the importance of global technology and speed, Know-How ( Trade Secrets) has an increasing role to play and is often overlooked. Knowledge of costs, sources, or processes is sometimes hard to protect. New competitors are always appearing. Legalistic approach is too limited. Companies therefore need to educate all employees and have them create a new protection culture that is creative and proactive. IP needs to be expanded and new non-traditional IP barriers need to be found and created. What analyses are needed? Some examples of possible approaches
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PROTECT
(never show)
NEGOTIATE
(only under CDA)
SHOW
(market!)
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Use different codes and cross-reference checklists to hide internal data (e.g., internal product catalogue that is not the same as customers catalogue) Danger: Can become confusing!
Possible new packaging and safety features Re-assess Key Account identification and contact measures. Does the whole team need to be involved? Manager only? Implement clear confidentiality and information access policies
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Overall Advice
IP Strategies require multidisciplinary skills and constant audits (why, what, how, how much, deadlines?) Create regular IP review meetings (bimonthly at latest) Develop your own in-house expertise
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Agenda
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1. Venue: Where? 2. Representation: Who to hire? 3. Elements to be proven 4. Possible remedies: What can we get? 5. Cost: How much? 6. Time: How long? 7. Risk: How strong is my case? (success rates?)
Part 2: ADR & Mediation
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Obtain visibility
Emotions, egos & anger
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= All elements at maximizing damage to opponent and increasing your chances of winning.
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Trademarks:
Plaintiff: Likelihood of confusion (e.g., surveys, consumer errors) & dilution Defendant: Invalidity, misuse of TM, abandonment, lack of confusion
Domain Names:
Plaintiff: confusing/identical + no rights/interests + bad faith Defendant: any one of no confusion, right/interest, good faith interest
Design Rights:
Plaintiff: overall impression on informed user Defendant: invalidity, functionality, no similarity on informed user, prior art
Trade Secrets:
Plaintiff: Efforts to keep TS + Duty of care + breach of duty of care Defendant: No efforts to keep TS, no duty of care, in public domain, reverse engineered, no breach (will also depend on terms of contract, if CDA-based)
Patents:
Plaintiff: Product covered by all elements of a claim (directly or by equivalence) Defendant: Invalidity, non-infringement (missing element of claim), practicing prior art, inequitable conduct, filewrapper estoppel
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Damages + interest
Lost profits Reasonable royalty Defendants profits
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1 2 3 4 5
8 9
Brazil UK
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Canada
382
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a rectangle a square
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The Facts The Law(s) Misunderstandings Needs Concerns Fears Feelings Emotions Perceptions Interests Values
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NEGOTIATION MEDIATION
ADJUDICATION
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Arbitration v.
Resolution
Source: Joanna Kalowski
P1
P2
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Mediation
Resolution
P1 M
P2
Subjective Fairness
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UNDERSTANDING
PRIVATE REFLECTION
RESOLUTION/ CLOSURE
FUTURE
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Summarising and Agenda setting Exploration of issues Private Sessions Option Generation (v.Alternatives) Negotiation(s)
(joint & private sessions)
FUTURE
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Agreement/ Closure
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Agenda
Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR
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Requires more than a legal compliance culture Also a business interest culture Starts off with education of ALL levels of company personnel Conduct regular audits accordingly
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Executive v. Non-Executive directors Personal knowledge Responsibilities & Restrictions Balance sheets & valuations Litigation exposure IP insurance Accurate lists of assets Fiduciary responsibilities
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National laws Signing-on & employment contracts Entry interviews Initial training (handbooks, policies) Ongoing education (e.g., s) Records & document management Termination & departure Exit interviews Follow-up with future employers Regular IP audits and review meetings
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Confidentiality: No secrets from previous employers should be brought in. Likewise, the companys secrets need to be protected. Each employee is in daily contact with company trade secrets, whether technical or commercial. His/her knowledge and cooperation in protecting these company trade secrets and improvements creates real barriers to entry for competitors. All employees should be bound by obligations of confidentiality even after they leave their employment. (NB: There can be criminal as well as civil penalties for breach). This needs to be understood and respected by employees throughout their careers & after leaving. Non-Compete: Each key employee should agree not to work for a competitor without the employers consent for a definite period of time after leaving the company (e.g., 12 months). In exchange, the company may agree to subsidize them for a while to incentivize them to work in a different industry, where their knowledge and expertise cannot help the competition. Although this may appear at first to be an unreasonable restriction on freedom of movement of individuals, this may be crucial for an SME. There is a clear collective benefit for remaining employees, whose jobs are safer. Departing employee can usually work just as easily in related industries (and get a subsidy). The employer feels safer and can invest more to train its staff. Invention Assignment: All improvements and inventions that relate to the industry should belong to the employer. The employee should help the company to comply with all necessary procedures. It is in all employees interests that all the companys inventions are properly identified and protected by it. Otherwise IP rights may often become unenforceable and competitors get a free ride.
2.
3.
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Termination of Employment
Painful and tricky Inhumane but safe v. Kind but risky Audits of IP assets & risks (by dept and category of IP) Check electronic copies and access to electronic info. Rely on and be consistent with HR policies Exit interviews are crucial Restrictions can be difficult: scope, time, geography Paid gardening leave need to balance protection with fairness Non-solicitation obligations Follow up with new employers can help (but also be tricky) E.g., http://www.ipfrontline.com/printtemplate.asp?id=3060
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Consultants
Four questions to always bear in mind (country-bycountry): 1. Is there valid IP here? 2. Who does it belong to? 3. Am I free to use it? 4. How can I protect it?
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Conflicts of commitment Conflicts of interest Freedom to use their ideas? Ownership? (Can they assign?)
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Severable Rights Countries: a) Partial Independence: Each co-owner can grant non-exclusive
licenses, subject to informing others and sharing proceeds (e.g., FR). Consultant can give to competitors but will have to pay a reasonable proportion. NEED NON-COMPETE OR CONSENT REQUIREMENT CLAUSES. Period! (e.g., US). Consultant free to do as he/she likes! NEED NONCOMPETE OR CONSENT REQUIREMENT CLAUSES.
b) Full Independence: Each co-owner can grant non-exclusive licenses. 3. All Countries sole co-owner cannot grant exclusivity: Unanimity
always necessary to grant exclusive licenses or assign rights. NB: Can be dangerous if not all inventors are listed and validity remains unaffected (e.g., CH). IF YOU WILL WANT TO BE ABLE TO GRANT EXCLUSIVE RIGHTS, YOU NEED A CLEAR CONTRACT WITH CONSULTANT.
YOU NEED TO ADDRESS THESE ISSUES PRE-EMPTIVELY, BEFORE THE WORK IS DONE!
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IP & Consultants
Presumption of ownership w/ Consultant Assignment Control Previous licenses/rights Indemnification issues Moral rights (esp. in situations) Confidentiality Improvements (benefits from other projects)
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Consultancy agreement provisions Advisory Board agreements Focus Group agreements JV provisions (e.g.,
http://www.ipfrontline.com/printtemplate.asp?id=3060)
http://www.otm.ui uc.edu/downloads/general-tech/licensing-guidelines.pdf
Conclusions
Understand why you are interested in IP Keep track of relevant IP and manage it appropriately Have an IP Steering Committee and set an IP Strategy Your ability to implement your business plan and receive financing increasingly depends on this Have an enforcement strategy Your employees and consultants are essential stakeholders in this process. Educate and manage them accordingly.
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