Transcript www.lifesciencesbc.ca

Helen Yu
Bull, Housser & Tupper LLP
March 24, 2009
Intellectual Property & Licensing Seminar
Presented to Life Sciences BC BioProducts and BioEnergy Sector
May 6, 2009
Helen Yu
Bull, Housser & Tupper LLP
What Is Intellectual Property?
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Intellectual property (IP): legal rights that result from
creations of the mind in the industrial, scientific, literary or
artistic fields
IP is one of the most valuable business assets because
registration of IP gives owner exclusive rights that may be
used as a competitive advantage to exclude others from
the marketplace
Forms of IP
 Patents
 Trade-marks
 Copyright
 Industrial Designs (Design patents)
 Integrated Circuit Topography Registrations
 Trade Secrets / Know How
 Plant Breeders Rights
Intellectual Property
Integrated Circuit
Topography
(Circuit Board)
Copyright
(Embedded
software)
Trade-mark
Patent
(embedded
software, novel
system, novel
method of
manufacture)
(Name / logo)
Trade secret
(Process,
customer list)
Common Law: Trade Secrets
 Trade secrets may be protected contractually by
non-disclosure or confidentiality agreements
 Advantages of protecting IP under trade secrets
is that a trade secret can exist perpetually and
does not require registration
 Disadvantage is any rights over a trade secret
can be instantaneously extinguished if publicly
disclosed
Trade Secrets
 to secure protection, you must demonstrate:
information has the necessary
quality of confidence about it
•
• information was disclosed in
circumstances importing an obligation
of confidence
• there has been an
unauthorized use of the
information
Trade Secrets
 Relying on trade secret protection is useful when the
IP is unlikely to result in granted rights under the
existing IP regime
 Also useful if an extended term for exclusive rights is
desired
 Trade secret protection is appropriate when the ability
to copy or reverse engineer the construction,
manufacturing process or formulation of the product is
difficult
Trade Secrets
 Create an inventory
 Contract before
disclosure
 Need to know basis
 Confidentiality
clauses with
customers,
distributors, etc.
 Physical and
electronic security
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Train your employees
Mark all documents
Shred, don’t discard
Do not disclose source
code
 Enforce confidentiality
and conduct exit
interviews
Patents, Trade-marks, Copyright, and
Industrial Designs
Patents
Trade-marks
Industrial
Design
Copyright
Aesthetics
Wares & services
Inventions
Literary, artistic,
dramatic &
musical works
Patents
 What is a patent?
 A government-sanctioned monopoly on an
invention
 What can you patent?
 Inventions: any new and useful art, process,
machine, manufacture or composition of
matter, or any new and useful improvement.
Patents: What can you patent?
New
Useful
Patent
Not obvious
Patents: What can you patent?
New else in
• Absolute novelty: no-one
the world can have invented it
before and made it available to
the public
• Keep it secret until you file the
patent application. In Canada
and the U.S., you have one year
to file after public disclosure; in
other countries, you lose your
right to file if you have disclosed it
publicly.
Useful
Patent
Not obvious
Patents: What can you patent?
New
Useful
Not obvious
•An invention is useful if someone
can take it and use it to construct
something or do something with
it.
•A perpetual motion machine is
not useful, for example.
Patent
Patents: What can you patent?
New
Useful
Not obvious
•There must be inventive
ingenuity involved. It must be a
“development or an improvement
that would not have been obvious
beforehand to workers of average
skill in the technology involved.”
•The test person is the
“omniscient but dull” artisan:
aware of all the relevant
Patentknowledge, but incapable of
‘invention’.
Patents
 How do you get a patent?
 Patent search
 Patent application
 1½ to 3 years
 Examined
 Process of objections and responses
 Patent issued
 Cost: $8,000 - $12,000
 Paris Convention
It is a long road……
US Patent
Application Filed
International
Search/Examination 16 mos
PCT Application
Filed (12 mos)
Examine
(Published 18 mos)
International Examination
(optional) 19 mos
File Amendments
US Patent Renewals
3.5 y
7.5 y
11.5 y
National Phase Entry
Canada
Europe
Japan
China
Deadlines and Renewals
AU
NZ
Patents
 What can you do with a patent?
 Manufacture and sell the invention
 Stop others from manufacturing or selling the
invention
 for 20 years retroactively to the date of filing
the application
 License the invention for manufacture or use by
others
 Assign the patent
Copyright
Copyright
Literary Works
Dramatic Works
Artistic Works
Musical Works
Copyright
Copyright
Literary works:
•Anything that is written or in print,
such as
manuals,
reports, brochures,
Literary
Works
instructions, application forms,
business forms, tickets, etc.
Dramatic
Works
•Also includes computer
software
Artistic Works
Musical Works
Copyright
Copyright
Dramatic works:
•Plays, movies, choreographic work,
mime (all of which must be fixed in
writing or otherwise)
Literary Works
•Video clips on website
Artistic Works
•Copyright covers not just the script,
Dramatic
Works such at Musical
Works
but the
entire concept
the
characters, location in time and place,
background, individual incidents, etc.
Copyright
Copyright
Literary Works
Musical works:
Artistic Works
•Any work of music or musical
composition, with or without words
Dramatic Works
Musical Works
•Includes compilations
•Background music for advertising or
on website
Copyright
Copyright
Artistic works:
Literary Works
Dramatic Works
•Includes paintings, drawings, maps,
charts, plans, photographs,
specifications, sculptures,
architecture
Artistic Works
(any building or “non-functional”
structure)
Musical Works
•Includes
CAD and other engineering
drawings
Copyright in web page
Copyright in a
photograph
Copyright in design
Copyright in a diagram
Copyright
 Copyright is created AUTOMATICALLY upon
creation of the material, provided material is original
 Original if requires skill and judgment (database)
 Protects the expression of an idea, not the idea
itself
-publish
-distribute
-translate
-copy
-modify
-adapt to
-perform
-exhibit
another medium
Copyright
 Term: generally for life of the author plus 50
years
 Owner: The author is the first owner of the
copyright, except for employees creating work in
the context of employment (employer owns
copyright); except commissioned photographs
(paid)
 Grant of Rights: copyright can only be
assigned or licensed in writing
Copyright
 Registration benefit: presumption of ownership;
burden of proof shifts to the other side if register
copyright
 Cost: $50 filing fee (online); $65 filing fee hard copy
 Use the © symbol to assert copyright and notify
others of claim of copyright; not essential but
recommended
© 2009 Bull, Housser & Tupper LLP
© <date(s) of publication> <owner>
Copyright
 Direct Infringement
 Must prove ownership, access and a
substantial copy (in the sense of quality taken,
not necessarily quantity)
 Knowledge of copyright irrelevant
 Indirect Infringement
 Assisting, inducing or contributing to the
selling, distributing or exhibiting of a work in
public that you know infringes copyright
Copyright
 Exceptions
 Fair dealing: research, private study, criticism or
review, in certain circumstances
 Must be for allowable purpose and must be fair
 Parody is not considered fair dealing in Canada
and is not a defence
 Example: ripping your own copy of a CD to make
copies for MP3 player and/or CD player in vehicle
Moral Rights
 Right of the author to:
 be associated with their work
 maintain the integrity of their work
 distorting, mutilating or otherwise modifying
 using a work in association with a particular
product, service, cause or institution
 but only if to do so would be to the prejudice
of the author’s honour or reputation
 Can be waived, but cannot be assigned
Trade-marks
Trade-marks: Key Concepts
 Acquired, protected, maintained and violated
through use
 Distinctiveness
 The mark and the product or service must be
associated
 The owner uses this association
 Association enables consumers to distinguish
the owner’s product or services from those of
others
Confusion
Trade-marks: Common Law
 Common law:
 rights acquired by simple use
 scope of protection will depend on the scope of
the use
 permits you to stop others from using the same
or similar marks in association with similar
products, in the area where your mark has a
reputation
 registration gives better rights
Trade-marks: Registration
 Canada-wide protection without need to prove
reputation in a geographic area
 Other benefits
 perfect defense to allegation of passing off
 registration cited against applications
 limited grounds to challenge after 5 years
 Valid for 15 years, and renewable for additional
15 year periods (with payment) indefinitely
Trade-marks
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Choose a “strong” mark that bears no relation to the
character or quality of the goods
Use your mark on all packaging, labeling, advertising
Keep representative samples of all your packaging,
labeling and advertising
Use ™ (for unregistered trade-marks) and ® (for
registered trade-marks)
Use your mark consistently
Refer to owner and licensee on packaging
Enforce your rights against third parties
Trade-mark Caution
 Chemical names and generic names are not
registerable as trade-mark – cannot claim exclusive
right to commonly used or accepted name
 Overcome by coining words that incorporate part of
the generic name
 Trade Dress: protecting appearance of packaging;
product design features must be shown to have
acquired distinctiveness
Industrial Designs
 An industrial design is:
 a decorative feature, such as a design or shape,
 … applied to an object …
 … that is intended to be reproduced more than
50 times.
 Industrial designs are excluded from copyright and
must be registered under the Industrial Design Act.
Industrial Designs
 Potential overlap with trade dress protection
 Like trade dress, industrial design cannot be
“functional” to obtain protection.
 Functional: when it is essential to the use or
purpose of the device or when it; refers to productdesign aspects that go beyond enhancing the
aesthetic appeal of the product, and serves some
other purpose such as improving product
performance.
 If the product design is found to be legally
functional, protection is not available
Industrial Design
HOLEY SOLES
CROCS CANADA INC.
Summary
Trade secrets
Subject
Information
Form
Contract or
implied
Duration
Potentially
forever
Scope
Protects anything
you can keep
secret
Patents
Inventions
20 years from
filing date
Protects functional
inventions
Copyright
Fixed works
Registration only
(one year grace
period in Canada)
Automatic, with
some advantages
to registration
Weaknesses
Protection lost
through disclosure
or independent
creation
Public domain after
expiry
50 years from
death of author
Protects the
expression of an
idea, not the idea
itself.
Does not protect
against
independent
creation
Trade-mark
Words and
logos used
with a product
or service
Automatic, with
significant
advantages to
registration
Potentially
forever
Permits you to
stop others from
using a similar
mark in
association with
similar
goods/services.
Must actively
maintain
distinctiveness
Industrial Design
Shape,
pattern,
ornament,
configuration
Registration only
10 years from
registration
Protects
appearance of
object; may protect
design elements
with functional
component
Not renewable
after expiry
(one year grace
period in Canada)
Intellectual Property & Licensing Seminar
Presented to Life Sciences BC BioProducts and BioEnergy Sector
May 6, 2009
Susan Ben-Oliel
Bull, Housser & Tupper LLP
Introduction to Licensing
 What is a License?
 Key Terms to Consider
 IP Issues, Threats, Risks
Licensing IP
A License is a special form of contract
 Provides a licensee certain defined rights
to use IP owned/controlled by the
licensor pursuant to certain agreed upon
terms and conditions
Licensing IP
 Licensor retains ownership of the IP
 Designer terms--License can cover
any arrangement you wish
 Few limits on possible license terms
 A license agreement may be
implied, but should be in writing
Licensing vs. Assigning IP
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IP can be assigned or licensed
Differ in fundamental ways
Assignment changes ownership
Assignments usually very short documents
Often signed in connection with rollover
agreements or royalty agreements
Licensing vs. Assigning IP
 Assignment generally preferred over
license by IP “acquirers” and investors
 IP becomes an asset of the assignee
 not affected by assignor bankruptcy
 IP owners prefer to license technology
 IP continues to be owned by licensor
 Greater control over IP
Licensing IP
 Types of License
 In licensing
 Out licensing
 Cross licensing
License Agreements-Key Steps & Provisions
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Due Diligence
Term
Exclusivity
Scope of use and Territory
Pricing strategy/fees
Performance obligations
Modifications/improvements
Representations & Warranties
Transferability
Rights to sue for infringement
Bankruptcy/Insolvency
Termination
License Agreements-Due Diligence
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What is Due Diligence?
 Searches, investigations and reviews
 Conducted by business parties, lawyers and other
advisors
 For purpose of informed decisions and assessment of
sources of risk
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Relationship to warranties and representations and risk
 Verification and assurances
License Agreements-Due Diligence
 Identification of IP Assets
 Verification of Status
 Verification of Ownership / Authority
 Infringement / Adverse Claims
 Validity
 Value / Functionality / Quality
Licensing Agreements-Due Diligence
 Needs to be intensified in tough economic
times
 Risks that short-cuts were taken re: IP
protection due to lack of funds
 How important are particular pieces of IP to
the deal?
 Danger in rushing due diligence
License Agreements-Term
 Specify the length of time of the license
 Duration of patent or copyright?
 Strategic considerations:
 Shorter term if licensor doubts licensee’s ability
 Longer term if commercialization requires
significant investment
 Know how?
License Agreements-Scope of Exclusivity
Sole vs. exclusive vs. non-exclusive
 Must be in writing
 Exclusivity represents an extra value (monopoly)
 Only sign an exclusive license agreement if you
know and trust the licensee
 Competitive advantage vs. freedom to operate
 Consider performance/anti-shelving provisions
License Agreements-Scope of Use
 Subject matter being licensed
 What the licensee can do with the IP
 Different applications of IP can be licensed
separately with different fields of use
 Geographic limitations
 The scope of use needs to be clearly defined in order
to avoid disputes and implied licenses
 In general, the licensee is only entitled to use the IP
for purposes that have been specified in the license
Licensing Agreement-Identify the Asset
For example:
 description of “invention”
 some or all patent claims (pending or
granted)
 Combination patents and know-how
or trade secrets
License Agreements-Grant
The core of the entire Agreement:
“Licensor hereby grants to Licensee a
perpetual, exclusive, worldwide right
and license to make, use and sell
Compound ABC for the treatment of
colon cancer.”
License Agreements-Fees
 Fees
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Fixed fees
Milestone payments
Royalties
Shares in the capital of the licensee
Consider cash flow needs and risk/reward
calculations to determine the right mix
License Agreements-Fees

Fees – Milestone Payments
 Milestone payments can be paid for certain events such as:
 Obtaining financing for a project
 Entering into different phases of clinical trials for
compounds, vaccines or medical devices
 Obtaining regulatory approval
 First commercial sale of a product
 Milestone payments tied to product development allow the
licensee to lessen the risk of a large up-front payment
 Draft Milestone payment provisions carefully
License Agreements-Fees
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Royalties can be calculated and paid based on the licensee’s sales under the
license (possible ascending and descending structure)
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Royalties are riskier than fixed payment but allow the Licensor to get a bigger share
of the commercial upside of technology
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Require a clear calculation method
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Secure Audit rights
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Anti-stacking clauses
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If licensee abroad—consider issues around repatriation royalties
License Agreements-Anti-Stacking
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If, at any time, LICENSEE discovers that any Licensed Product or the use
thereof in the Field or the practice of any Licensed Technology infringes
claims of an unexpired patent or patents other than those in the Patent
Rights, LICENSEE may, if it has not already done so, negotiate with the
owner of such patents for a license on such terms as LICENSEE deems
appropriate. Should the license with the owner of such patents require the
payment of royalties or other consideration to such owner then the royalties
otherwise payable under this Agreement shall be reduced by the dollar
amount of the royalties or consideration paid to the owners of such patents;
provided that in no event shall the royalty payable under this Agreement be
less than one percent (1%) on the first $50,000,000 in Gross Sales and two
percent (2%) on the any Gross Sales above $50,000,000.
License Agreements-Improvements
 Is the licensee entitled to modify the IP or not?
 If modification is permitted, who owns modifications?
 Licensors usually want to own all IP relating to the core
IP
 Modifications may be inherent to the use that will be
made of the work, e.g. update of websites
 If licenses exist in separate territories, all parties might
benefit from cross licensing of improvements
 Grant backs/Right First Refusal
License AgreementsRepresentations/Warranties
 Address and apportion risk
 Who is responsible when things go
wrong
 Not boilerplate
 They are key contractual promises
License AgreementsRepresentations/Warranties
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Status of IP
Title and authority
Validity and enforceability
Non-infringement
Functionality/Quality/Performance
License Agreements-Infringement of IP
Right to sue for infringement of IP
 Is the licensor obligated and/or entitled to sue for IP
infringement, and if so, under what conditions?
 The licensor often does not want to be involved in
infringement proceedings
 Exclusive licensees are entitled to sue for
infringement of certain IP
 Licensor is often required to assist in such actions,
even if no control
Licensing Agreement-Termination
Under what conditions will the license terminate:
 Failure of Licensee to perform
 Breach of the terms of the license agreement
 Bankruptcy of either party
 By mutual consent
Licensing Agreements-Performance/Antishelving
 Licensor (and sometimes Licensee) to terminate if
certain milestones are not met
 Product development
 Regulatory approval
 Sales
 More important with exclusive licenses**
 Prevent Licensees from “shelving” the technology
 Reversion to non-exclusive
Licensing Agreements-Bankruptcy
 Core Technology Licenses – will they survive
insolvency? U.S. Position:
 Lubrizol Enterprises v. Richmond Metal Finishers, Inc.
(4th Cir., 1985)
 Ct. concluded that the non-exclusive license
agreement was an executory contract under s.
365(a) of U.S. Bankruptcy Code and could be
disclaimed
 Sole remedy of licensee (Lubrizol) was to
seek damages as an unsecured creditor
Licensing Agreements-Bankruptcy
 U.S. Position: Cont’d
 U.S. Legislative Response to Lubrizol:
 1988: s. 365(n) US Bankruptcy Code:
gives Licensee 2 options:
 retain license rights, make payments
& forfeit any claim against licensor
 treat license as terminated for breach
& sue for damages
Licensing Agreements-Bankruptcy
 Current Canadian Position:
(a) Disclaimer of Licenses:
 an insolvent licensor or its trustee in
bankruptcy can disclaim or reject
executory contracts (New Skeena
Forest Products Inc. v. Don Hill &
Sons Contracting Ltd. (2005, BCCA)
Licensing Agreements-Bankruptcy
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Current Canadian Position: Cont’d
 license agreements = executory contracts and
can be disclaimed by insolvent debtor or
trustee under either BIA or CCAA proceedings
(b) Sale of IP to Third Party:
 effectively defeats licensee by selling IP to a
third party e.g. Royal Bank of Canada v. Body
Blue Inc. (2008, O.J.)
Licensing Agreements-Bankruptcy
 Amendments to BIA and CCAA
 Under new legislation, licensees will remain
at some risk of disclaimer:
 proposed amendments do not protect
against disclaimer by a
trustee/receiver
 uncertain position re: other obligations
of licensor
Licensing Agreements-Bankruptcy
Practical Considerations: Consider Structures to Protect
Licensee
 Assignment of IP with right of reversion/license back
 Have Licensor vend IP into separate ‘holdco’
 Security interest over licensed IP
 Other options (but none are bulletproof) e.g. separate
license fees from other fees to be paid to licensor
Licensing Agreements-Patents
 Consider provision preventing Licensee
from bringing action to challenge Licensor’s
patents during term of License
 Consider separating some compensation
between patent and know-how and/or trade
secrets (benefit to Licensor if patent claims
fail)
Licensing Agreements-Trade-marks
 Control
 Preserve distinctiveness of mark
 Specify quality standards
 Provide inspection rights
 Licensor must exercise control
 Consider prohibition against Licensee’s
registration of Licensor’s trade-mark in
new market country
Licensing Agreements-Trade Secrets
 Confidentiality provisions
 Who decides if patent protection to be
sought in the future
 What happens if secret lost?
 Will there be on-going flow of
information exchanged?
Licensing Agreements-Copyright
Moral rights
 Only applies to copyrights
 Are moral rights wholly or partially waived?
 If so, which moral rights?
 right of integrity
 right of association
 Be aware that moral rights represent a value
Advantages of Licensing IP
 Licensee can acquire access into new technological
area or add to portfolio
 Access rights to IP to join “patent pool”
 Decrease legal and financial risks
 Enable entry into foreign markets
Licensing Agreements
Licensing IP to allow entry into Patent Pool
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patent pool is a consortium of at least two companies agreeing to crosslicense patents relating to a particular technology
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The pooling of the patents, licensing all patents in the pool collectively, and
sharing royalties
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May need strategically to acquire patents to access the pool
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Example: Sony, Philips and Pioneer pooled and shared patents for MPEG
data compression technology
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Example: Alcatel-Lucent, Cisco, Clearwire, Intel, Samsung and Sprint
formed alliance with the aim of stimulating the patchy market for WiMax
products
Advantages of Licensing IP
 Franchisor (licensor) permits franchisee (licensee) to use trademarks or service marks in contractually controlled manner for
marketing goods/services
 Licensor might use licensees as licensor’s secondary (or
tertiary, etc.) manufacturing source.
 Avoid tariffs which might attach to export of Canadian
manufactured products (if Licensee will be manufacturing
abroad)
IP Risks: Licensing
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control over licensed technology may be weakened
(depending on circumstances)
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risk of loss of trade-mark rights if use not monitored
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Risk of violation of rights protecting trade secrets
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in developing countries, problems re unauthorized use of
technology by third parties (enforcement issues)
Importance of IP to the License?
2003—83% of the collective market value of publicly traded
companies on S&P index was attributable to owned or
licensed intangible assets (up from ~50% in the late 1970s)
 IP rights may be of great interest to potential investors of
licensee
 Can be industry specific:
 in some cases software patents can be discretionary
and their contribution to a deal minimal—contrast to
pharmaceuticals (no patents—no deal)
Further Discussion
Susan Ben-Oliel
[email protected]
604.641.4936
Helen Yu
[email protected]
604. 641.4890