Inventor Boot Camp Thomas Franklin 10 17 2009

Presentation Overview
Introduction to Intellectual Property (IP)
Types of IP
Trade Secrets
Copyrights
Trademarks
Patents
Timing Issues for Protecting IP
Patent Strategy Models

Business Value of Intellectual Property
Economists estimate that two-thirds of the value of large businesses in the US is due to intangible or intellectual property assets*
The World Bank estimates that, on average, 40% of company valuations are from intellectual property*
PriceWatershouseCoopers estimated that as much as 90% of the value of the world’s top 2000 enterprises would consist of intellectual property*
In 1978, IP accounted for 20% of shareholder value, but has grown to 80% in 2007**
*Source: Patent Barista, April 2008
**Source: Brookings Institution and Ocean Tomo

Intellectual Capital: Intangible Ideas

Leveraging Intangibles to Create Intellectual Property
Intellectual capital is an intangible asset that must be protected like any other valuable company asset
As we move away from the industrial age and into the information age, leveraging intellectual capital is paramount
Trade Secrets, Copyrights, Patents, & Trademarks are the legal tools that convert some intellectual capital into IP
These legal tools are analogous to security measures to protect tangible assets
Use of these tools prevents further loss of value and converts ideas into property
A custom IP strategy should be developed to suit:
Type of business
Products
Actions by competitors
Litigiousness of industry
Funding cycle
Size of company
Growth strategy
High costs require customized solution for your business
More money is lost pursuing the wrong strategy--no matter how inexpensively--than pursuing the right strategy within the confines of a reasonable budget

Securing Your Intellectual Capital as IP

Types of IP: Trade Secrets
Definition: Any secret formula, pattern, device, or compilation of information used by the company that gives it an advantage over competitors
Must not be in the public domain
Company must take steps to protect their trade secrets
No Expiration: Trade secret rights last forever if properly protected
May loose some rights to a trade secret if someone else patents it
Action: Trade Secret Program & reminder letters to employees who leave
SECRET CONFIDENTIAL PROPRIETARY

Trade Secret Timing Issues
Definition: Any secret formula, pattern, device, or compilation of information used by the company that gives it an advantage over competitors and is actively protected
Timing Issues
Must keep secret
Never expire if kept secret
Train new employees to avoid use of trade secrets or IP from prior employer
Action Items
Employment/Contractor agreements addressing confidentiality of IP
Non-Disclosure agreements with vendors and partners
Identify trade secrets (e.g., “PROPRIETARY”) and take action to protect (e.g., computer, e-mail, document control, security)
Consider publication policy that requires review prior to technical journal publications, participation in standards boards and presentation at technical symposia
Remind workers of confidentiality in exit interviews
SECRET CONFIDENTIAL PROPRIETARY

Types of IP: Copyrights
Definition: Protects works of original artistic expression in tangible form
Software, Written Material, Maskworks, Recordings, Maybe Logos
Non-employees generally own their copyright so must have assignment in consulting agreement
Prevents: Reproduction, Distribution, Public Performance, Display, and Derivative Works
Why: Statutory Damages/Attorney Fees/Ability to Sue in Federal Court
Term:
Individuals: Life+70 yrs.
Companies: Shorter of 95 yrs. from publication or 120 yrs. From creation
Once Filing Program Set Up, No Attorney Typically Needed
Example Notice: ©ABC Corporation, 2004. All Rights Reserved.
More Info: www.copyright.gov
©

Copyright Timing Issues
Definition: Protects works of original artistic expression in tangible form (e.g., Software, Written Material, Maskworks, Recordings, Maybe Logos)
Timing Issues
File Federal Registration prior to release of product
Term: Individuals: Life+70 yrs. Companies: Shorter of 95 yrs. from publication or 120 yrs. from creation
Action Items
No longer required to mark with ©, but still recommended
Set-up program to regularly file copyrights
Lock-up rights of non-employees who generally own their copyright so must have assignment in consulting agreement
Train employees on Open Source issues and use of other third party material
Check all agreements for stealth out-licenses of copyrights
Don’t rely upon “fair use” or other exceptions unless approved by counsel
©

Types of IP: Domain Names
Definition: World Wide Web address for a domain
Right to name purchased from domain name registry
Must be renewed periodically
Various gTLD and ccTLD have different rules
Cyber-squatters diligently prey on lax registration by companies

Domain Name Timing Issues
Definition: World Wide Web address for a domain of computers that serve content on the Internet
Timing Issues
First come first served for registration
Renewals are performed annually
Be prepared to purchase when domains are search to avoid cybersquatters who monitor searches
Action Items
Register all potential trademarks and consider different marks if someone else owns the mark
Organize all registrations to ease administration and automate renewals
Standardize contact information on position/title rather than individual
Register domains that are likely to be used by typo squatters
Consider action against cybersquatters using current marks

Types of IP: Service Marks and Trademarks
Definition: Words, symbols, designs, colors & sounds used to identify the source of one’s products or services to consumers
A mark indicates the source of the product/service
Mark must distinctively identify product/service to avoid customer confusion
Local rights accrue in the US based upon use
Federal Registration “®” enhances rights and damages
Never expire so long as used
TM for products and SM for services
Similar to trade dress
More Info: www.USPTO.gov
®

Service Mark and Trademark Timing Issues
Definition: Words, symbols, designs, colors & sounds used to identify the source of one’s products or services to consumers
Timing Issues
Search once potential mark(s) are chosen as it will only get more difficult to change
Consider Federal Registration prior to use if mark will ultimately be used in interstate commerce
Choose foreign filings to match product footprint
Use not required prior to filing, but use should be expected in the next 4 years or so to avoid abandonment of your issued registration for failure to show use
Trademark rights never expire so long as used continuously
Action Items
Encourage clients to pick several possible names to chose from after search results indicate those cheapest to adopt
Properly label marks with “TM” or “®” to enhances rights and damages
Set-up marking guidelines that the organization follows to avoid self-inflicted damage to marks
Watch for and remedy any infringement/dilution/genericide of mark
®

Types of IP: Patents
Definition: Confers the inventor the right to exclude others from making, using, manufacturing, importing the invention
A patent does not give you the right to practice your invention, just the right to exclude others from practicing your invention
Protects Invention for 20 years from filing
“ Anything under the sun made by man”—Supreme Court
Software, Business Methods, Genes, Man-made Organisms
Exchange Government Monopoly for Full Disclosure of Invention
Doesn’t require infringer to be exposed to idea like trade secrets or copyrights
Invention must be novel and non-obvious
Cannot be publicly known or offered for sale (one year grace period in US)
Inventor-based system in US so must get assignment from inventor
More Info: www.USPTO.gov

Patent Timing Issues
Definition: Confers the inventor the right to exclude others from making, using, manufacturing, importing the invention
Timing Issues
Protects invention for 20 years from filing
Patent rights go to the first to invent, not the first to file
Cannot be publicly known before filing to preserve foreign rights
Cannot be publicly known or offered for sale more than one year before filing to preserve US rights
Action Items
Consider way to capture your technical staff inventing first such as an inventor notebook program
Assess patent landscape when entering a new area with different competitors
Consider freedom to operate clearance study prior to investment in a specific product, and work through any design arounds to avoid redesign
Monitor design reviews, trade show plans, proposed technical papers, or any other investment in product development for ideas suitable for patenting
Consider patent committee to champion filings and patent reward program to incentivize inventors
File patents on improvements to keep products always covered by patents
Confirm proper marking of products to not patent pending or issued patents

Patent Landscape Study
Assess patent landscape when entering a new area with different competitors
Who is filing patents and how many
What general areas are they filing patents
Do you currently have any “ammunition” in your portfolio to allow entry without threat of suit
What is the likelihood of patent lawsuits in space?

Freedom to Operate
Consider freedom to operate clearance study prior to investment in a specific product
If product or component is already out there, consider purchase from patentee and add value integrating with larger system
Work through any design-arounds to avoid later redesign
Design-arounds are potentially ideas you could patent

Patent Strategies
Offensive Strategy “Sword”
Pursuit of Licensing Revenue
Litigating Patents
Use as “Stick” in Negotiations
Defensive Strategy “Shield”
Portfolio Building
Avoiding Patent Litigation
Avoiding Willful Infringement

Portfolio Building
Tie patent expenditures to where you add value in marketplace (Market driven versus innovation driven)
Decide level of commitment to patents necessary to reduce risk of pre-emptive suit by competition
Monitor design reviews, trade show plans, proposed technical papers, or any other investment in product development for ideas suitable for patenting
Consider patent committee to champion filings and patent reward program to incentivize inventors
File patents on improvements to keep products always covered by unexpired patents

Market Driven Approach to IP
Analyze product and future products to determine what differentiates your product in the market place
E.g., “Cleans stains 20% better”, “10% faster”
Focus IP on those innovations that give market advantage
Determine reasonable budget and IP tools to utilize
Judiciously pick the best ideas from both the technical perspective and the marketing perspective
Feedback: Accentuate those ideas that have IP protection in your marketing
Constantly re-evaluate expenses and abandon IP that is less strategic

Common Patent Strategy Models
Strategic models can generally placed in a few general model
Research Labs without products
Small Companies
Large Companies
Pure IP Play
Drug Companies
Individual Inventor
Understanding your model and your competitors is crucial to any patent program

Patent Strategies: University and Government Labs
Promote dissemination of academic research to industry through out-licensing
Focus IP tools on most promising technologies to preserve limited budgets
Choose licensee companies most likely to commercialize product to drive royalties
Licensee milestones are common to assure commercialization
Incentives to scientists that promote profession
Strong desire to avoid liability

Patent Strategies: Small Companies / Start-ups
Funding is usually tight so patent strategy must be focused, but not ignored
May in-license technology to get a competitive advantage
Small companies are “under the radar” of large companies for some time period so take advantage of that
A stable of patents must be developed before a large company tries to crush them (success = on radar)
The quality of the patents is more important than the quantity (warrants searching and careful participation)
Foreign filing may be started in the hope that funding will soon follow to pay for the large expenses that soon follow

Patent Strategies: Large Companies
Large companies want to protect their markets with large portfolios of patents
Defend any lawsuit by finding their own patents to assert
Cross licenses done with competitors with their own large portfolios
The more patents the better to bury your competitors in litigation and the associated legal fees
Sue small competitors and/or acquire them
Smaller companies often cannot afford the legal costs of litigation
A modern trend is to seek out-licensing to capitalize the patents
May try licensing competitors without patent portfolios or non-competing companies
Can afford foreign filing of patents

Patent Strategies: Pure IP Play
Some companies/individuals never pursue a product related to their patent(s)
E.g., MIPS, Rambus, closet inventor
Shield is no defense because nothing to retaliate against
Licensing is pursued by building a war chest from the early licensees to use against the more reluctant licensees
Closet inventors are rarely taken seriously because of the litigation costs prevent enforcement of their patent(s)
Extremely risky strategy as one unfavorable patent litigation ruling can decimate the market cap of the pure IP play
Established companies refer to these licensing organizations as “Patent Trolls”

Patent Strategies: Drug Companies
Some companies never pursue a product related to their patent(s)
E.g., Bio companies
Out-license their compound to drug makers
Defensive portfolio is no deterrence because the patent holder has no product to retaliate against
Only a few patents cover a particular drug, but those patents are extremely important to ward off generics
Difficult to protect tools that find drugs
Portfolio approach (i.e., minefield) less effective due to sparse patent thicket makes avoiding other’s patents easy
Unlikely your drug will infringe other’s patents
Consider freedom-to-operate opinion to assess the patent litigation risk
Aggressive foreign filing of patents

Patent Strategies: Individual Inventor
Usually plans to obtain a patent without commercializing
Odds of success without commercialization are very low
Only 2% of patents ever make money according to the Patent Office
Litigation very expensive
Companies are usually unwilling to license without a credible threat of litigation
Success is so rare today for individuals that it is a newsworthy event when it happens
Gather war chest with cheap licenses to afford litigating the more difficult licenses
Reputable firms willing to take patent cases on contingency are a rarity

Patent Insurance
Umbrella Defense Policies Available
Defense Reimbursement with co-insurance, deductible & underwriting costs
Per Patent Policies Available
Defense Reimbursement with co-insurance, deductible & underwriting costs
Infringement Abatement with deductible & underwriting costs

Valuation of Patents: Intangible Assets
Valuation of any patent is difficult
Automated Tools are available (e.g., PatentValuePredictor.com)
Results from tools are a starting point
Consider factors such as licensing value, litigation value and defensive value
Different markets & products command different royalties

Thomas Franklin, Partner [email_address]
Tom Franklin is a partner in Townsend’s Denver and San Diego offices. His practice focuses on patent and trademark prosecution, licensing and strategic counseling for high tech companies in the electronic, software and business method fields.
Mr. Franklin received his J.D. from University of San Diego in 1997 and a B.S. in Electrical and Computer Engineering from San Diego State University in 1990, summa cum laude. He is admitted to the State Bar of Colorado and practice as a patent attorney with U.S. Patent and Trademark Office.
Prior to entering the field of law, Mr. Franklin spent eight years working in semiconductor fabrication facilities at the Naval Ocean Systems Center and Hughes Aircraft and several more as a senior engineer for Lockheed Martin developing digital designs for cryptographic data links.
Practice Area Electronics & Software Denver Office 1200 Seventeenth Street Suite 2700 Denver, CO 80202 tel 303.571.4000 fax 303.571.4321 San Diego Office 12730 High Bluff Drive Suite 400 San Diego, CA 92130 tel: 858.350.6100 fax: 858.350.6111

Firm Profile www.townsend.com
Townsend is among the largest firms specializing in patents, trademarks, and copyrights in the United States. As a full-service IP firm, we have the legal and technical expertise to handle every IP need. Most of our attorneys have technical degrees to complement their legal education, and many have advanced degrees and/or industry experience.
Townsend has a 150 year history in focused on IP alone.
The firm has 210 lawyers that all practice in the IP area.
Offices in Denver, Palo Alto, San Diego, San Francisco, Seattle, Tokyo, Washington DC, and Walnut Creek.

Web Resources
Patent and Trademark Offices
Searchable databases of patents, publications, and trade/service marks
US: http://www.uspto.gov
Europe: http://ep.espacenet.com
Japan: http://www.jpo.go.jp
US Copyright Office
http://www.copyright.gov
Townsend and Townsend and Crew
http://www.townsend.com

Inventor Boot Camp Thomas Franklin 10 17 2009

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Inventor Boot Camp Thomas Franklin 10 17 2009 — Presentation Transcript

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