Protecting the Inventions of Start-ups

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This presentation addresses the why, what, and how to protect inventions from the vantage point of the early-stage, pre-financing, start-up company that is interested in patenting its inventions and developing an intellectual property portfolio that maximizes the company's valuation and sets it up for success during the intellectual property due diligence that accompanies financing rounds, corporate partnerships, commercialization, and merger and acquisition.

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Protecting the Inventions of Start-ups

  1. 1. Protecting Inventions of Start-ups Icogenex Corporation Adda C. Gogoris Partner Gary M. Myles, Ph.D. Of Counsel June 27, 2013
  2. 2. Topics • Why Should a Start-up Invest in Patent Protection? • Developing a Sound Strategy for Identifying and Protecting Inventions • Do You Own Your Patents? • Guarding against Challenges to Validity/Enforceability • Guarding against Infringement of Third-party Patents • Two Words about Our Firm
  3. 3. Why Should a Start-up Invest in Patent Protection for Its Inventions?
  4. 4. Why Patent Your Inventions? • Some Simple Truths – Patents Provide a Right to Exclude – Patents DO NOT Provide a Right to Practice – Patent Protection is Expensive • Expensive to obtain patents • Very expensive to enforce patents • So, why invest now in patent protection?
  5. 5. Why Patent Your Inventions? • Financing – Angel Funds – Venture Capital – Bank Loans • Corporate Partnering – Big Pharma – Big Biotech • Product Commercialization – FDA Approval • Exit – Merger or Acquisition – Initial Public Offering Patents are Tools that Help a Company Achieve its Business Objectives
  6. 6. Why Patent Your Inventions? • During Due Diligence before a Deal, the Following are Scrutinized: – Management Team – Financials – Commercial Market – Product Development, Regulatory, and Manufacturing – Patents – Exit Strategy
  7. 7. Why Patent Your Inventions? • Issues to Address Prior to IP Due Diligence 1. Develop sound strategy for identifying and protecting inventions that aligns with your commercial objectives 2. Ensure that you own your patents 3. Guard against challenges to validity/enforceability 4. Guard against infringement of third-party patents 5. Obtain patent licenses to gain freedom-to-operate
  8. 8. Developing a Sound Strategy for Identifying and Protecting Inventions
  9. 9. Developing a Sound Strategy for Identifying and Protecting Inventions • Patents vs. Trade Secrets – Patents • Exclusive rights • Easy to reverse engineer or independently develop • Medium length useful life of technology – Trade Secrets • No exclusive rights • Difficult to reverse engineer • Very short or very long useful life of technology • Value in not being generally known
  10. 10. Developing a Sound Strategy for Identifying and Protecting Your Inventions • Focus patent protection on commercial products • Adjust patent strategy to accommodate changes in the commercialization plan – Periodically vet R&D activities – Open dialogue among technology, business, and legal – Keep outside counsel informed
  11. 11. Developing a Sound Strategy for Identifying and Protecting Your Inventions • Create Barriers to Entry – Patent claims should “read on” • Your commercial product • Your competitor’s commercial product – Claims should be difficult to circumvent • Claim scope • Claim variety (e.g., compositions, formulations, and methods) – Extend patent protection through life-cycle management • Patent term is 20 years from date of filing • Continue to add to portfolio as R&D activities progress
  12. 12. Developing a Sound Strategy for Identifying and Protecting Inventions • Seek Patent Protection in Key Commercial Markets – Consider commercial markets of potential acquirers and partners
  13. 13. Developing a Sound Strategy for Identifying and Protecting Inventions • Don’t Over-invest in Patent Protection – Focus on obtaining a few well-drafted, properly claimed, thoughtfully prosecuted patents that protect commercial products – Avoid pursuing patents if the primary goal is to generate a revenue stream • Out-licensing for profit is unlikely to generate value and, instead, will likely be a distraction to a young company
  14. 14. Developing a Sound Strategy for Identifying and Protecting Inventions • Adopt Rigorous Systems for Memorializing, Identifying, Communicating, and Protecting Inventions – Employment and consulting agreements • Early assignment of inventions – Laboratory notebooks • Maintain daily • Countersign periodically (weekly or monthly) – Invention disclosures • Communicate new inventions from scientists to legal – Publication/public disclosure policy • PATENT FIRST • Publish, disclose, sell later – Confidentiality • Systems to ensure secrecy (especially for trade secrets) • CDAs and other third-party agreements
  15. 15. Do You Own Your Patents?
  16. 16. Do You Own Your Patents? • Take Care in Determining Inventorship – 35 U.S.C. 262 Joint owners In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.
  17. 17. Do You Own Your Patents? • Take Care in Determining Inventorship – Ethicon, Inc. v. U.S. Surgical Corp. 135 F3d 1917 (Fed. Cir. 2001) • Ethicon was exclusive licensee to patent naming one inventor • Ethicon sued U.S. Surgical for patent infringement • U.S. Surgical and intervenor-defendant (“Choi”) filed motion to add Choi as co-inventor; District Court granted motion • Federal Circuit upheld District Court finding that Choi contributed to subject matter of two of 53 patent claims • Choi licenses his rights to the patent U.S. Surgical • Ethicon’s infringement action against U.S. Surgical dismissed; licensee does not infringe
  18. 18. Do You Own Your Patents? • Take Care in Determining Inventorship – Beware Ethicon trap for the unwary • The two claims to which Choi had contributed were NOT the subject of the Ethicon infringement action against U.S. Surgical • When Choi was added as a joint inventor, his ownership rights were in the patent as-a-whole, including the 53 claims to which he made no inventive contribution – Lesson of Ethicon • Take care to properly assess inventorship – In internal joint research efforts – In collaborative research efforts with a third party – Inventorship ≠ authorship • Inventorship is a legal determination based on “conception”
  19. 19. Do You Own Your Patents? • Obtain (and Record) Inventor Assignments – Stanford v. Roche, 563 U.S. __ (S. Ct. 2011) • Stanford post-doc “agrees to assign” inventions resulting from employment • Post-doc collaborates with [Roche] and signs agreement “will assign and does hereby assign … ideas, inventions and improvements” made “as a consequence of [his] access” to [Roche] • Post-doc discloses inventions to Stanford • Stanford obtains patents and sues Roche for infringement • Supreme Court upholds Federal Circuit that Stanford’s “agrees to assign” language is not an assignment but [Roche’s] “does hereby assign” is • Stanford did not own patents asserted against Roche
  20. 20. Do You Own Your Patents? • Obtain (and Record) Inventor Assignments – Beware the lessons of Stanford v. Roche • Present day “does hereby assign“ trumps “agrees to assign” • DO NOT DELAY in obtaining (and recording) assignments • Former employees, especially disgruntled employees, are often reluctant to cooperate by assigning inventions • Consider incorporating “does hereby assign“ language in employment agreements
  21. 21. Guarding against Challenges to Validity/Enforceability
  22. 22. Guarding against Challenges to Validity/Enforceability • Perform Searches of the Patent and Scientific Literature to Identify the Closest Prior Art – 35 U.S.C. § 102, novelty – 35 U.S.C. § 103, non-obviousness • Pursue Patent Claims Taking into Account that Prior Art
  23. 23. Guarding against Challenges to Validity/Enforceability • America Invents Act – First-To-File System • Inside U.S. -- 1-year grace period • Outside U.S. -- Absolute novelty – More Prior Art Available • Disclosures before “effective filing date” – NOT date of invention – U.S. and PCT patent applications filed before “effective filing date” » Even if not in English » Even if never filed in the U.S. • No geographic restrictions – Public uses and sales outside US are prior art – Exceptions to prior art are very narrow
  24. 24. Guarding against Challenges to Validity/Enforceability Prior Art Exception Exception Description 35 USC 102(a)(1) Publications, public uses, on sale, otherwise publically available 102(b)(1)(A) Public disclosure was by inventor (or derived from inventor) during 1- yr grace period 102(b)(1)(B) Public disclosure was by another after disclosure by (or derived from) inventor during 1-yr grace period 35 USC 102(a)(2) US-related patent applications filed by another 102(b)(2)(A) Subject matter of application was obtained from inventor 102(b)(2)(B) Subject matter of application was publicly disclosed by inventor (or derived from inventor) before the application was filed 102(b)(2)(C) Subject matter of application was commonly owned or pursuant to joint R&D agreement as of inventor’s application effective filing date
  25. 25. Guarding against Challenges to Validity/Enforceability • Disclose Material Prior Art to the Patent Office – Duty to disclose to Patent Office information known to be material to patentability of any pending claim, including: • Closest information over which individuals associated with the filing or prosecution of a patent application believe any pending claim patentably defines • Prior art cited in search reports of a foreign patent office in a counterpart application – Duty to disclose extends to individuals associated with the filing or prosecution of a patent application, including • Named inventors • Attorneys/agents preparing/prosecuting application • Everyone substantively involved in preparing/prosecuting application and associated with the inventor, assignee, or person to whom there is an obligation to assign – Breach of duty renders a patent unenforceable for inequitable conduct
  26. 26. Guard against Challenges to Validity/Enforceability • America Invents Act – File early and file often within the first year • Do not rely on grace periods – File provisional applications, but beware the trap of a poorly drafted provisional • Ensure that disclosures support the claims according to the requirements of 35 U.S.C. § 112, first paragraph – Enablement » Teach how to “make and use” the claimed invention – Written Description » Demonstrate that applicant had “possession” of the claimed invention – File subsequent provisional applications as R&D progresses and/or commercialization objectives change – File if an invention is inadvertently made public
  27. 27. Guarding against Infringement of Third-party Patents
  28. 28. Guarding against Infringement of Third-party Patents • Remember that a Patent Does NOT Provide Freedom-to-Operate – Become familiar with the patent landscape • Identify potentially relevant patents that correspond to art identified in searches of the scientific literature or patent databases or cited by the Patent Office • Review for claims that “read on” any aspect of your commercial products
  29. 29. Guarding against Infringement of Third-party Patents • Become Familiar with Patents of Your Competitors – Identify problematic claims and consider options for • Narrowing during prosecution – Third-party prior art submissions • Invalidating after issuance – Post-grant review – Inter-partes reexamination – Address letters from third parties that identify their patents – Consider licensing options • To obtain freedom-to-operate – Non-exclusive license is sufficient • To obtain right to enforce – Need exclusive license – Consider obtaining opinions of non-infringement/invalidity
  30. 30. About Our Firm
  31. 31. About Our Firm • Intellectual Property Boutique – Patent • Chemical & Life Sciences • Electrical & Software • Mechanical – Trademark, Domain Name – Copyright – Licensing – Unfair Competition – Litigation – Post Grant Patent • Established 1900 • Eight Offices Nationwide – Minneapolis (Main Office) – Denver – Atlanta – New York – Seattle – Madison – Washington DC – Knoxville
  32. 32. About Our Firm • Broad Range of IP Services – Patent Drafting and Prosecution (Domestic & Overseas) – Strategic IP Analysis and Planning – Portfolio Management and Evaluation – Counseling and Opinions – Negotiation/Drafting of IP Agreements – Litigation/Dispute Resolution – Contested Administrative Proceedings (PTAB, TTAB, UDRP) – IP Due Diligence Investigations • Broad Range of Clients – Individual Inventors – Academic and Not-for-profit Research Institutions – Start-up Companies • Biotechnology (Large Molecule) • Pharmaceutical (Small Molecule) • Telecom • Software – Domestic and Overseas Mid-Market Science and Technology Firms – Fortune 500 Companies
  33. 33. About Our Firm 125 Attorneys, Agents, and Technical Advisors >20% with Advanced Degrees in Science and Engineering 12 Ph.D. and D. Pharm, 2 M.D., 7 M.Eng and PE Representative Ph.D. and M.S. degrees Biochemistry and Biophysics Biomedical Sciences Bioorganic Chemistry Cellular and Developmental Biology Chemical Engineering (M.S.) Chemistry Food Science Mechanical Engineering Medicinal Chemistry Microbial Engineering (M.S.) Microbiology Molecular Biology Organic Chemistry
  34. 34. Thank You! Adda C. Gogoris agogoris@merchantgould.com (212) 223-6653 Gary M. Myles, Ph.D. gmyles@merchantgould.com (206) 342-6226
  35. 35. About Our Firm Representative Life Sciences Attorneys and Agents Seattle Gary M. Myles, Ph.D., University of North Carolina Chapel Hill •Biochemistry and Biophysics, Post-doc Fred Hutchinson CRC Minneapolis Katherine Kowalchyk, Ph.D., University of Minnesota •Microbiology Mark Skoog, Ph.D., Indiana University •Biochemistry Tchao J. Thao, M.D., University of Minnesota Eric DeMaster, M.S., University of Minnesota •Microbial Engineering Madison Edward J. Pardon, M.D., University of Wisconsin Medical School Denver Paul Prendergast Ph.D., University of Colorado Health Sciences Center •Experimental Pathology
  36. 36. About Our Firm Representative Chemistry Attorneys and Agents New York Adda C. Gogoris, Cornell University •Chemical Engineering Andrew Larsen, Ph.D., University of North Carolina •Organic Chemistry, Post-doc Boston College Atlanta Daniel R. Evans, Ph.D., Mississippi State University •Bioorganic Chemistry, Post-doc U.S.C., Assistant Professor U. Md. Denver Ryan Fletcher, Ph.D., University of Colorado Health Sciences Center •Biochemistry, 2005 Minneapolis Randall Hillson, Ph.D., University of California at Berkeley •Chemistry Heather Kroona, Ph.D., University of Minnesota •Medicinal Chemistry, Post-doc University of Michigan

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