Engineering 145 October 20,...
Transcript of Engineering 145 October 20,...
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October 20, 2009!Engineering 145
IP Considerations for Technology Entrepreneurs
Dan Dorosin, Fenwick & West LLP
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Overview
!! Introduction to IP Considerations for Technology Entrepreneurs
!! What is IP?
!! Why does IP matter?
!! Key Ideas for Today
1.! IP creates value
2.! What IP matters depends …
3.! Don’t blunder with your IP!
Please ask your questions!
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Types of Intellectual Property
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Five main types of IP protection Type of IP What is
Protectable
Examples
Trademark Branding (Nike swoosh)
marks and logos slogans
Copyright Creative, authored works; expressions (not ideas)
software songs, movies web site and its content
Trade Secrets Secrets with economic value (Coke recipe)
non-public technology product roadmap customer lists formula
Contract, NDA As defined in the contract
technology
business information
Patent Inventions new technology
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Trademark protects branding and marks
!! Trademark gives you the right to prevent others
from using “confusingly similar” marks and
logos
•! Indentify source of goods
!! Trademark protection lasts as long as you are
using the mark
!! The more you use the mark, the stronger your
protection
!! Trademark registration is optional, but has
significant advantages if approved
!! Country by country
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Copyright protects creative works of authorship
!! Copyright gives right to prevent others from copying,
distributing or making derivatives of your work
•! Protects “expressions” of ideas but does not protect the underlying ideas
!! (Way) more than just technology: songs, books, movies,
photos, etc.
!! Copyright protection lasts practically forever
!! Copyright does not prevent independent development
!! Registration is optional, but is required to sue for
infringement
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Contract
!! Protection agreed to by contract
!! No registration process
!! You have whatever protection is defined in the
contract (e.g., NDA gives you certain rights to
protection of your confidential information)
!! The protection lasts for the time period defined in
the contract
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Patents
!! A government granted monopoly to prevent others from making, using or selling your invention
•! Even if the other’s infringement was innocent or accidental
!! Invention must be non-obvious
!! Protection lasts typically for 15-20 years
!! Application and examination is required
•! Typical cost for application and exam is $10-30k
•! Typical time for application and exam is 1-4 years
!! Must file in U.S. within one year of sale, offer for sale, public disclosure or public use
!! Provisional application alternative (see below)
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What Can be Patented?
!! Just about anything . . .
•! Circuits, hardware
•! Software, applied algorithms
•! Formulas, designs
•! User interfaces
•! Applications, systems
•! Business processes (sometimes)
!! But not these . . .
•! Scientific principles
•! Pure mathematical algorithms
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Start Up Company IP Strategies
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Key Idea #1 – IP Creates Value
!! Innovative IP can create company value
!! How carefully you have:
•! Acquired your IP
•! Protected your IP
•! Exploited your IP
Will be crucial to your ability to realize on value,
whether from investors, customers or acquirer
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Key Idea #2 – IP Needs Company Dependent
!! What type of IP matters to a venture, and what it should
do to protect IP, is highly company/industry dependent
!! Every company has unique business and IP needs and
considerations, requiring unique analysis and/or protection
•! Medical device company -- patents
•! Web 2.0/social network start up – trademark, copyright
•! Enterprise software company – copyright, trade secret
•! Industry dynamics (need portfolio to trade?)
•! Stage of the company’s development/resources
•! Etc.
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Proactively Develop IP Strategy
!! Important for start ups to develop an IP
strategy to map out:
•! Key players and technologies in its market(s)
•! Expectations of where the market is going
•! Opportunities for strategic advantage
!! Strategy will evolve over time, including b/c
of changes in available company resources,
changes in marketplace, technological
advances, etc.
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Common Goals for a Patent Portfolio
Assuming patents “matter” for your business …
!! Build a portfolio
!! Increase valuation of company
!! Future protection of market share
!! Future counterstrikes against a competitor’s
patents
!! Future revenue stream from licensing
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Different Roles for Patents in the Portfolio
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Typical Start Up Patent Timeline
Core
(Provisional?)
Important Guard/
Applications
Incorporation Initial Funding
Specification Completed
Alpha Product
FCS
Secondary Guard/
Applications
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Typical Start Up Portfolio, 2 years out
Applications or
Guard (4-10)
Core
(1-3)
Numbers,
Counterstrike (2-4)
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Provisional Patents
!! Full utility patent applications takes time and $$
!! Provisional application “alternative” to full utility
•! Get into queue quickly and cheaply
•! Automatically expire after one year
•! No patent rights are granted
!! Provisional applications require the same level of
detail as utility applications
!! Be careful of pitfalls; not a substitute for full
utility
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Patents vs. Trade Secrets: A Common Start Up IP Strategy Question
+ Pros
!! Very strong protection,
even against “innocent”
infringers
!! Prevents others from
patenting the same
invention
- Cons
!! Will take years to
acquire patent rights
!! Expensive
!! Eventually must give
up trade secret
protection
!! There may be an
interim period with no
protection
You have an invention; how protect it?
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Patents vs. Trade Secrets: A Common Start Up IP Strategy Question
Consider example of a proprietary manufacturing process:
!! Can’t easily know if competitors are violating
!! Maintain as trade secret, rather than file public
patent application
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Common IP Blunders by Start-Ups
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1.!Founders Don’t Make Clean Break with Prior Employer or Research Institution
!! Under CA law, employers may own inventions
that are “related to employer’s reasonably
anticipated R&D”
•! Very subjective standard
•! Start ups don’t often have resources to litigate
!! Process important — “take only memories”
•! Does prior management think “good luck” or “good riddance”??
!! Hire cautiously from former employers
!! University patent policies apply, too
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2.!Company Cannot Clearly Show That it Owns its IP
!! Take the time to create a well documented,
clear chain of title to your IP
!! Written assignments of IP by founding team
•! Well documented?
•! Are there issues about ownership of what is
being assigned? (See blunder #1)
!! Independent Contractors
•! Need written agreements assigning work created
•! Copyright law; patent law
!! Employee Invention Assignment Agreements
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3. Company Loses Patent Rights due to Filing Delays/Invention Disclosures
Event
Disclosure in a printed
publication
Offer for sale in the U.S.
Public use in the U.S.
Red flags
White paper
Journal/conference article
Web site
Any disclosure to outsiders
Start of sales effort
Price list, price quotation
Trade show demonstration
Any demonstration not under
NDA
!! In U.S. patent rights forfeited if wait > 1 year after:
!! There is no one year grace period in most foreign countries
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4.!Company Grants “Challenging” Licenses to IP Limiting Value Created by IP
!! Early licensing terms can impact value of IP
•! Grant of exclusive rights to IP in key verticals, territories, etc.
•! Grant of “most favored nations” license terms or other licensee-favorable economic terms
•! Key value creating agreement not assignable in acquisition (or, alternatively, not terminable upon
acquisition)
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Key Idea #3
!! Don’t commit a blunder!
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Types of Rules and Regulations
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Rules and Regulations
!! General Regulations (Federal/State) •! Securities Regulations •! Employment Regulation •! Health & Safety Regulations
•! Sarbanes-Oxley •! Antitrust Laws
•! 409A
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Rules and Regulations
!! Industry Specific Regulations •! DCMA Act - web •! 510K - medical devices •! UL/CSA/FCC - consumer electronics
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Questions/Discussion
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Back Up Slides
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Requirements for a Patent Application
In order to get patent protection for your
invention
!! Your invention must be non-obvious
!! You must be “first”
!! You must include a certain amount of detail
about your invention in the application
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Non-obvious
Given the prior art at the time of the invention,
would a typical engineer
!! Identify the problem, and
!! Solve it with the invention
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“First”
!! U.S.: “first to invent”
•! Keep good records
•! File early
!! Outside U.S.: “first to file”
•! File early
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Required Level of Detail
!! Written description – You identify the invention
!! Enablement – Others will be able to duplicate
your invention from your description
!! Best mode – You did not “hide the ball” with
respect to critical techniques
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Provisional Pitfalls
!! Broad concepts of the invention are not described
!! Unnecessary admissions
!! Unnecessary limiting language
!! Provisional does not contain as much information as the
inventor thinks it does
!! Provisional does not meet the written description
requirement
!! Provisional does not meet the enablement requirement
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When Should Provisionals Be Used?
!! No time/$$ to prepare a utility application
!! Provisional is 90% completed version of utility
application, but last 10% may take a while
!! Buy one year of decision time
!! Not a substitute for a utility application
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Examples of IP
!! Core “technology”: source code, hardware
designs, architectures, processes, formulas
!! Brand, logo, domain name
!! Business processes, know how, customer
information, product road map
!! Content: music, books, film
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Intellectual Property = Value
!! Valuable intangible property that is protectable
under the law
!! Creates competitive advantage
!!“Build a better mouse trap”
!! Licensable – multiple authorized users at the
same time, creating source of (very high
margin) revenue
!!IBM license revenue example
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General IP Model
!! You create something that falls within a class protected
by the law
!! For some classes, you get protection automatically
!! For other classes, to get full protection, you should/must
go through a registration, application or examination
process
!! “Protection” is a negative right
!! The law gives you the right to stop others from using your creativity