VLP Virtual Law School
            IP for Non-Lawyers
                     March 4, 2009

Ellen Leznik, Founding Partner, ...
Select IP Issues in Licensing


Ellen Leznik, J.D.
ELeznik@VirtualLawPartners.com



March 4, 2009

VIRTUAL LAW PARTNERS L...
What is Intellectual Property?
       Patents
        Exclusive rights granted by Federal Government for a specific perio...
Importance of Definitions
       Ability to define terms

        Often a sign of whether the deal has been sufficiently ...
Importance of Definitions (cont’d)

       “Nesting” definitions vs. circular definitions
        (cont’d)

        Examp...
IP Rights: Inventorship vs. Ownership

       Inventors/Creators
        Employees
        Consultants
        Contractor...
IP Rights: What is Included?

       A bundle of rights
        Use
        Territory
        Time
        Exclusion of o...
IP Rights: License Grant
       Recipient

        Single entity

        Affiliates
               Can also be done thro...
IP Rights: License Grant (cont’d)

       Purpose

        Patent license: use, make, have made, offer
        for sale a...
IP Rights: License Grant (cont’d)
        Scope

         Territory
               Be precise when defining Territory
   ...
IP Rights: License Grant (cont’d)

        Exclusivity

         Exclusive vs. non-exclusive
         Exclusive option vs...
IP Rights: License Grant (cont’d)

        Sublicense Rights

         “Have made” implies sublicense rights
         Res...
IP Rights: License Grant (cont’d)
        Royalty/Fee

         Royalty-bearing
         Fee-bearing
         Royalty-fre...
IP Rights: License Grant (cont’d)

        Sample license grant clauses
         Biotech:
         “BiotechCo grants to P...
IP Rights: License Grant (cont’d)

        Sample license grant clauses (cont’d)

         Software:
         “Subject to...
Collaborations with Government
        Company’s existing inventions

         Template:

         “Background Invention”...
Collaborations with Government
     (cont’d)

        New inventions resulting from collaboration
         Template:

   ...
Collaborations with Government
     (cont’d)

        Government reserved rights - third party license
         Pursuant ...
Collaborations with Government
     (cont’d)

        Government reserved rights – non-exclusive royalty-free
         li...
Collaborations with Government
     (cont’d)

        Government reserved rights – non-exclusive royalty-free
         Li...
Collaborations with Government
     (cont’d)

        Government reserved rights – non-exclusive royalty-free
         Li...
Collaborations with Government
     (cont’d)

        Know what you have
         when working with academic institutions...
IP Warranty
        To give or not to give?
         Biotech vs. Software


        Sample provisions

         Biotech:...
IP Warranty (cont’d)

        Sample provisions (cont’d)

         Software:
         “SoftwareCo represents and warrants...
Reversion of rights
        Failure to meet diligence obligations

        Commercialization of the Product is not
     ...
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Ip For Non Lawyers March 4, 2009

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This presentation covers the following select IP-related topics:
• What is IP? Importance of definitions.
• Inventorship vs. ownership.
• Grant of rights: defining the scope of your license; potential pitfalls.
• Collaborations with government and government-affiliated institutions: how they may affect your IP rights.
• IP warranty: to give or not to give?
* Reversion of rights: what happens if something doesn\'t go as planned?

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Ip For Non Lawyers March 4, 2009

  1. 1. VLP Virtual Law School IP for Non-Lawyers March 4, 2009 Ellen Leznik, Founding Partner, Virtual Law Partners LLP eleznik@virtuallawpartners.com (650) 321-1393 Dianna DeVore, Partner, Virtual Law Partners LLP ddevore@virtuallawpartners.com (415) 963-4362
  2. 2. Select IP Issues in Licensing Ellen Leznik, J.D. ELeznik@VirtualLawPartners.com March 4, 2009 VIRTUAL LAW PARTNERS LLP
  3. 3. What is Intellectual Property?  Patents Exclusive rights granted by Federal Government for a specific period of time.  Copyrights Protection provided to a wide range of “original works of authorship” that are fixed in a tangible form of expression, such as software, literary works, photographs, audio and video recordings and other forms of intellectual works. Example of notice: © 2009 Virtual Law Partners LLP  Trademarks Words, names, symbols or other devices used to identify and distinguish business, goods or services. State and Federal registration. ™ - not yet registered ® - registered  Trade Secrets Confidential business information which provides an enterprise a competitive edge. 3 March 4, 2009 Virtual Law Partners LLP
  4. 4. Importance of Definitions  Ability to define terms Often a sign of whether the deal has been sufficiently well understood and defined.  “Nesting” definitions vs. circular definitions Example of a “nesting” or “hierarchical” definition: “Collaboration Patents” shall mean all foreign and domestic patents (including extensions, reissues, re-examinations and inventors certificates relating thereto) that issue from patent applications (including substitutions, provisionals, divisionals, continuations and continuations-in-part of such applications) that claim inventions in the Collaboration Know-How and that are filed by or on behalf of one or both of the parties hereto. “Collaboration Technology” means the Collaboration Patents and the Collaboration Know-How. 4 March 4, 2009 Virtual Law Partners LLP
  5. 5. Importance of Definitions (cont’d)  “Nesting” definitions vs. circular definitions (cont’d) Example of a circular definition: “Licensed Products” means all products the manufacture, use or sale of which involves the use of Licensed Technology. “Licensed Technology” means all patents and know-how owned and controlled by Company which are necessary or useful in the manufacture, use or sale of Licensed Products. 5 March 4, 2009 Virtual Law Partners LLP
  6. 6. IP Rights: Inventorship vs. Ownership  Inventors/Creators Employees Consultants Contractors Researchers (academic, non-profit, government) Collaborators  Transfer of ownership Assignment License Reserved rights 6 March 4, 2009 Virtual Law Partners LLP
  7. 7. IP Rights: What is Included?  A bundle of rights Use Territory Time Exclusion of others 7 March 4, 2009 Virtual Law Partners LLP
  8. 8. IP Rights: License Grant  Recipient Single entity Affiliates Can also be done through a sublicense Consider what effect it may have on other terms, such as minimum royalties Joint Ventures Consider issues relating to license termination issues, such as when your JV was not properly established, JV is dissolved, or one party purchases all JV interests 8 March 4, 2009 Virtual Law Partners LLP
  9. 9. IP Rights: License Grant (cont’d)  Purpose Patent license: use, make, have made, offer for sale and sell. Copyright license: copy, make derivative works and reproduce. 9 March 4, 2009 Virtual Law Partners LLP
  10. 10. IP Rights: License Grant (cont’d)  Scope Territory Be precise when defining Territory Example: China “Territory” shall mean the People’s Republic of China, including all provinces and regions thereof, but excluding Hong Kong. Field of use Need to specify if licensed technology has applications in more than one field Potential pitfall – indication splitting (“Amgen/Ortho” problem) 10 March 4, 2009 Virtual Law Partners LLP
  11. 11. IP Rights: License Grant (cont’d)  Exclusivity Exclusive vs. non-exclusive Exclusive option vs. exclusive license Exclusive option vs. right of first refusal 11 March 4, 2009 Virtual Law Partners LLP
  12. 12. IP Rights: License Grant (cont’d)  Sublicense Rights “Have made” implies sublicense rights Restrictions on sublicensing Impact on other provisions: royalties, termination, confidentiality, inventions  Transferability Potential pitfall: conflict with the Assignment provision 12 March 4, 2009 Virtual Law Partners LLP
  13. 13. IP Rights: License Grant (cont’d)  Royalty/Fee Royalty-bearing Fee-bearing Royalty-free Fully-paid  Term Patent license vs. blended license (patent plus know-how) Term of license grant vs. term of royalty 13 March 4, 2009 Virtual Law Partners LLP
  14. 14. IP Rights: License Grant (cont’d)  Sample license grant clauses Biotech: “BiotechCo grants to PharmaCo and its Affiliates an exclusive, royalty-bearing license under Licensed Technology to research, develop, make, have made, import, export, market, sell and distribute Licensed Products in the Territory in the Field.” 14 March 4, 2009 Virtual Law Partners LLP
  15. 15. IP Rights: License Grant (cont’d)  Sample license grant clauses (cont’d) Software: “Subject to the terms and conditions of this Agreement, SoftwareCo hereby grants to Customer a fee-bearing, royalty- free, nonexclusive, nontransferable license to use the Software through the SoftwareCo Servers. Except as specifically authorized by this Agreement, no license is granted under this Agreement to Customer to distribute the Software for use, whether or not as part of the SoftwareCo Services. SoftwareCo shall be responsible for obtaining all third party software licenses required to provide the SoftwareCo Services.” 15 March 4, 2009 Virtual Law Partners LLP
  16. 16. Collaborations with Government  Company’s existing inventions Template: “Background Invention” means an Invention conceived and first actually reduced to practice before the effective date of this Agreement. Background Inventions shall be included in Appendix B. Negotiated: “Background Invention” means an Invention conceived or reduced to practice before the effective date of this Agreement. 16 March 4, 2009 Virtual Law Partners LLP
  17. 17. Collaborations with Government (cont’d)  New inventions resulting from collaboration Template: “CRADA Subject Invention” means any Invention of a VA Employee, of Collaborator, or of both a VA Employee and Collaborator, conceived or first actually reduced to practice in the performance of the Statement of Work [15 U.S.C. 3703(9), (10)]. Negotiated: “CRADA Subject Invention” means any Invention of a VA Employee, of Collaborator, or of both a VA Employee and Collaborator, conceived and reduced to practice in the performance of the Statement of Work [15 U.S.C. 3703(9), (10)]. 17 March 4, 2009 Virtual Law Partners LLP
  18. 18. Collaborations with Government (cont’d)  Government reserved rights - third party license Pursuant to 15 U.S.C. § 3710a(b)(1)(B), if VA grants an exclusive license to a CRADA Subject Invention made solely by a VA Employee or jointly with a Collaborator employee, the Government retains the right to require Collaborator to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive sublicense to use the CRADA Subject Invention in Collaborator’s licensed field of use on terms that are reasonable under the circumstances, or, if Collaborator fails to grant a license, to grant a license itself. The exercise of these rights by the Government will only be in exceptional circumstances and only if the Government determines (i) the action is necessary to meet health or safety needs that are not reasonably satisfied by Collaborator, (ii) the action is necessary to meet requirements for public use specified by Federal regulations, and such requirements are not reasonably satisfied by Collaborator, or (iii) Collaborator has failed to comply with an agreement containing provisions described in 15 U.S.C. § 3710a(c)(4)(B). The determination made by the Government under this paragraph is subject to administrative appeal and judicial review under 35 U.S.C. § 203(2). [Negotiated: No license or sublicense shall be granted to a third party prior to the final outcome of such appeal.] 18 March 4, 2009 Virtual Law Partners LLP
  19. 19. Collaborations with Government (cont’d)  Government reserved rights – non-exclusive royalty-free license to collaboration inventions. Consistent with the definition of a DAP and pursuant to 15 U.S.C. § 3710a(b)(1)(A) for CRADA Subject Inventions owned solely by VA or jointly by VA and Collaborator and licensed pursuant to the option of Paragraph 6.2 or 6.3, Collaborator grants to the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention or have the CRADA Subject Invention practiced throughout the world by or on behalf of the Government. In the exercise of this license, the Government shall not publicly disclose trade secrets or confidential commercial or financial information that is privileged or confidential within the meaning of 5 U.S.C. § 552(b)(4) or which would be considered privileged or confidential if it had been obtained from a non-Federal party, except where authorized by law. 19 March 4, 2009 Virtual Law Partners LLP
  20. 20. Collaborations with Government (cont’d)  Government reserved rights – non-exclusive royalty-free License to collaboration inventions made solely by the collaborating company Template: Pursuant to 15 U.S.C. § 3710a(b)(2), for CRADA Subject Inventions made solely by an employee of Collaborator, Collaborator grants to the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention or have the CRADA Subject Invention practiced throughout the world by or on behalf of the Government for research or other Government purposes. 20 March 4, 2009 Virtual Law Partners LLP
  21. 21. Collaborations with Government (cont’d)  Government reserved rights – non-exclusive royalty-free License to collaboration inventions made solely by the collaborating company (cont’d) Negotiated: Pursuant to 15 U.S.C. § 3710a(b)(2), for CRADA Subject Inventions made solely by an employee of Collaborator, Collaborator grants to the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the CRADA Subject Invention throughout the world by the Government for research purposes only. 21 March 4, 2009 Virtual Law Partners LLP
  22. 22. Collaborations with Government (cont’d)  Know what you have when working with academic institutions when using government grants when licensing out the resulting technology  Government contracts and M&A transactions 22 March 4, 2009 Virtual Law Partners LLP
  23. 23. IP Warranty  To give or not to give? Biotech vs. Software  Sample provisions Biotech: “BiotechCo represents and warrants that it owns or holds licenses to the BiotechCo Patents and BiotechCo Know-How and has sufficient rights and power to grant the licenses to PharmaCo which it purports to grant herein.” 23 March 4, 2009 Virtual Law Partners LLP
  24. 24. IP Warranty (cont’d)  Sample provisions (cont’d) Software: “SoftwareCo represents and warrants to Customer that: (i) SoftwareCo is the sole and exclusive owner of the Software; (ii) SoftwareCo has full and sufficient right, title and authority to grant the rights and/or licenses granted to Customer under this Agreement; and (iii) the Software does not infringe any patent (to SoftwareCo’s knowledge), copyright, trade secret, trademark or other intellectual property rights of a third party.” 24 March 4, 2009 Virtual Law Partners LLP
  25. 25. Reversion of rights  Failure to meet diligence obligations  Commercialization of the Product is not scientifically or commercially reasonable  Bankruptcy  Material Breach 25 March 4, 2009 Virtual Law Partners LLP

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