SKGF_Presentation_Commercializing Intellectual Property Through Licensing_2008

USPTO13th Annual Independent Inventors

Conference August 8, 2008

Commercializing Intellectual Property Through Licensing

Michael LeeSterne, Kessler, Goldstein & Fox

Washington, DC

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What is LES?

� A professional society, established in 1965, dedicated to high standards and ethics among persons engaged in licensing

� A community of 6,000 licensing professionals inthe USA and Canada

� A network of more than 12,000 licensing professionals around the world (LESI)

� A forum to share best practices, current standards, and trends in licensing and intellectual asset management

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In What Industries do

LES Members Work?

29%

9%

10%

5% 3%

39%

Health Care

High Technology

Chemicals Energy &

Materials

Industry/University

Government Transactions

Consumer Products

Financial Markets

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At What Types of Organizations?

34%

22%

14%

11%

5%

4%

4%3%2%1%

Corporation

Law Firm

Consultancy

University

Research

Sole Propreitor

Service Provider

Financial Services

Government

Student

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What are the Benefits of

LES Membership?

� Networking

� Extensive formal andinformal opportunities

� Seasonal and annual meetings

� Industry-specific contacts and content

� Shared best practices

� Mentoring

� Education

� Local and national programs

� Learning from experts in the field

� Curriculum-based and experience-driven professional development

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What are the Benefits of

LES Membership?

� LES Worldwide Membership Directory

� Publications

� les Nouvelles, the professional journal of licensing

� LES Viewpoints, the quarterly LES newsletter

� Licensing Consultants & Brokers Directory

� Access to the leading meetings on current licensing topics

� Reduced registration fees for meetings and educational programs

� Access to exclusive content on the LES website

� Opportunity to serve your profession and to be a member of a global organization

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LES Education

2008 LES Technology Transfer SeminarSan Diego, CA, September 15-16, 2008

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2008 LES ANNUAL MEETING

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Licensing Certification

CLP Registry:

http://www.licensingcertification.org/

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How Can You Learn More

About LES?

� Visit www.usa-canada.les.org

� Email: [email protected]

� Call: (703) 836-3106

� Attend: A Local LES Chapter Meeting

� Ask: Any Current LES Member

Commercializing IP

Common Goals & Themes

Licensing to support and further your present and future business objectives

(Requirement: Business Plan)

Maintaining control of your intellectual property

Managing risk as opposed to eliminating risk

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Development and

Commercialization Timeline

� Development� Consultant agreement� Joint Development agreement� Material Transfer Agreement

� Marketing� Non-Disclosure Agreement (NDA) /

Confidentiality Agreement� Option Agreements

� Commercialization� License agreement� Collaboration / Partnering agreement� Manufacturing agreement

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Importance of NDAs

Meeting with

Potential

Licensee/Partner/

Customer

File Patent Application Patent Issues

T1

T2

T1: Pendency at the USPTO

T2: Trade Secret & Contractual Protection (i.e., NDA)

T3: Contractual Protection

T4: Patent & Contractual Protection

T3 T4

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Anatomy of a Confidentiality

Agreement (1)

� Control Disclosure� �hold all Confidential Information in

strict confidence�

�Exclude (or precisely define) subsidiaries, parents, affiliates, etc.

�Define �Confidential Information�� Subject matter as well as medium (i.e.,

software, test boards)

� Return of Confidential Information

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Agreement (2)

� Control Use

� �use the Confidential Information only for evaluating a possible business transaction between the Parties�

� No license to any IPRs

� Retain ownership

� No obligation to disclose

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Agreement (3)

� Term�Typically equal to the time needed to

exchange, analyze and assess the Confidential Information

�Obligations concerning disclosure and use should survive expiration or termination� Consider when your patent applications

will publish

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Agreement (4)

Beware of Residuals Clauses� �The obligations on use shall not apply to Confidential

Information which the Receiving Party can demonstrate was retained in the unaided memories of the Receiving Party�

� Rights are limited to use, not disclosure� Do patents trump?� �The foregoing will not be deemed to grant to Recipient a

license under Disclosing Party�s copyrights, patents or other intellectual property rights.�

� Unaided memory; without reference to documents or materials

� If you are forced to sign a NDA with a residuals clause, limit what you disclose; negotiate a new NDA ASAP

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Review: Development and



� Marketing� Non-Disclosure Agreement (NDA) / Confidentiality

Agreement� Option Agreements


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Consultant Agreement (1)

� Ownership of Intellectual Property� Secure ownership of the IP where the consultant is a co-

inventor � Joint and Several ownership. Each joint owner of a patent

can sell or license without the consent or accounting to the other owners

� �All worldwide rights, title and interest in and to the Work Product, and all intellectual property rights in and to the WorkProduct, shall belong exclusively to Company.�

� �Work Product includes any intellectual property conceived, produced or reduced to practice by Consultant, alone or with others, resulting from or relating to the consulting services for Company.�

� Consider extending this obligation for a reasonable period of time after termination of the consultant agreement

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� Present assignment of IP to be developed in the future (promise to assign is not sufficient)� �Consultant hereby assigns and

transfers to Company all of Consultant's worldwide rights, title and interest in and to all Work Product.�

� List Consultant�s Pre-Existing IP

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� Reporting requirement

� �Consultant and Company shall meet at least once per month, and Consultant shall promptly disclose all Work Product in writing to Company during such meetings.�

� Reasonable non-compete

� Defined by subject matter and/or competitors

� Reasonable period of time

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Joint Development Agreement (1)

� Ownership� Company 1 Pre-Existing IP

� Company 2 Pre-Existing IP

� Jointly Developed IP (who owns?)

� Joint ownership: Each owner can sell and license without consent of or accounting to the other owners

� Party 1 owns; Party 2 is granted a license

� Each party is given rights in a separate entity that owns the IP

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Joint Development Agreement (2)

� Potential encumbrances on the other party�s Pre-Existing IP� Technology licensed from third parties� Ownership issues� Open source

� Patent Prosecution� Who controls? Who pays?� What happens if there is a disagreement on

which inventions to patent, and/or countries to pursue?

� Enforcement

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Review: Development and



� Marketing� Non-Disclosure Agreement (NDA) / Confidentiality

Agreement� Option Agreements


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The Effect of a License Agreement

Licensor Licensee

Consideration

IP Rights

Royalties Services Improvements

TimeField of

Use Territory ExclusivityImprovements

Other

Consideration

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IP That Can Be Licensed

� Patents

� Know-How

� Trade Secrets

� Copyrights

� Trademarks

� Domain Names

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Rights That Can Be Licensed (1)

� Patents� Make

� Use

� Sell

� Example� License 1: Make and Sell Widgets

� License 2: Use Widgets in government applications

� License 3: Use Widgets in non-government applications

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Rights That Can Be Licensed (2)

� Copyrights

- Reproduce

- Distribute

- Display

- Transmit

- Publicly Perform

- Prepare Derivative works

� Example

� License 1: Reproduce and distribute Licensed Music

� License 2: Publicly perform Licensed Music

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Types of License Agreements (1)

� In-Licenses: Others license their IP to you

� Out-Licenses: You license your IP to others

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� Trade Secret / Know-How License� Maintenance of trade secrets (and penalties

for disclosure of trade secrets)� Training (possible opportunity for consultant

agreement)

� Patent License� Geographical and temporal scope of

royalties

� Hybrid License� Patents + Trade Secrets + Know-How� Allocate royalties among patents & TS/KH

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� Exclusive: All rights granted to a single licensee�Performance milestones / minimum

royalties

� �best efforts�

� Sole: A single licensee, but licensor may also practice the IP

� Non-Exclusive: Multiple licensees

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Anatomy of a License Agreement

� Recitals� Definitions� Grant� Royalty� Term/Termination� Assignability/Transferability� Representations and Warranties� Confidentiality

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Recitals

� Specifies the nature of the transaction and the intent of the parties

� Useful to educate the reader

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Definitions

� Defines terms that are used throughout the agreement

� Example: �Licensed Subject Matter

� Patents, trademarks, copyrights: Listed in schedules

� Trade Secrets and Know-how: Important to carefully define and establish boundaries

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Grant

� What is being licensed?

�Definition of the Licensed Subject Matter is key

�What rights are being granted (for example, make/use/sell for patents?)

� Who is being licensed?

�Parents, subsidiaries, affiliates

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Grant � Specifications/Limitations

� Use�Government vs. private sector

�WIFI vs. cellular

�Commercial vs. non-commercial

� Time�For the next 5 years

� Geography�Country / State / City / County

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Grant - Example

� Licensor grants to Licensee a license under the Licensed Patents to make and sell Widgets in the United States east of the Mississippi River.� Who? Licensee� What? Licensed Patents� Rights? Make and sell� Field of Use? Widgets� Geographical scope? East of the Mississippi� Length? Specified in Term/Termination

section

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Grant � Other Considerations

� Release from past infringement

� Right to sub-license

� Grantbacks

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Royalty � Advanced / Upfront

Payments

� Generally, more common in exclusive licenses

� Sometimes applied against future royalties

� Sometimes paid upon satisfaction of milestones

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Royalty � Ongoing Payments

� Royalty schedule

� Volume discount

� Increase upon issuance of patents

� What is the base?

� RF transceiver or the cell phone?

� Exclusive license

� Performance milestones / minimum royalties / cure by cash

� Convert to non-exclusive license

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Royalties � Other Considerations

� Paid up license

�Discount for the time value of money

� Reporting/Auditing

�Mechanisms for licensee to report royalty calculation and licensor to verify accuracy.

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Term/Termination

� Term�Defines the length of the license

� Future date certain

� �last to expire patent�

� Termination�Mechanisms for early termination of

the agreement� Breach

� Failure to satisfy milestones

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Term/Terminator � Survival of

Clauses

� Some terms should survive expiration/termination

�Confidentiality

�Sell Off

� Patent Indemnification

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Assignment

� Defines whether agreement may be assigned/transferred to another party

� Very important that individuals / small companies be able to assign in the event of an acquisition

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Representations and Warranties

� Representation: A statement of fact made to induce another to enter a contract.

� Warranty: A part of the contract that must remain true in accordance with its terms.

� Examples:� Ownership

� Patent infringement (knowledge qualified)

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Confidentiality

� Cannot disclose terms of the license

� Cannot disclose the existence of the license�Exception for legal counsel,

accountants, potential acquiring parties, potential licensees

�Exception for press release; identification as licensee on website

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Other Terms

� Most favored licensee

� Best efforts

� Waiver

� Arbitration

� Governing law

� Integration, Severability, Force Majeure, Notices

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Licensing Timeline Example

1. Invent and prepare a prototype� Consultant agreement� Joint development agreement

2. Select and implement IP protection strategy� Patents, trade secrets, trademark, copyright

3. Develop business plan; identify markets / partners / customers

4. Develop licensing strategy5. Meetings with potential partners / customers

� Non-disclosure agreement

6. Negotiate key terms� Term Sheet

7. Draft license agreement� Joint development agreement

� Collaboration / Partnering agreement� Manufacturing agreement

8. Negotiate and execute license agreement9. Post execution maintenance

Questions?

Licensing Executives Society (U.S.A. and Canada), Inc.

1800 Diagonal Road, Suite 280Alexandria, VA 22314

(703) 836-3106www.usa-canada.les.org

[email protected]

Michael LeeSterne, Kessler, Goldstein & Fox

[email protected]

Michael Lee is a patent attorney and Director with Sterne, Kessler, Goldstein & Fox, an IP firm in Washington, DC. Mr. Lee is an experienced licensing attorney, and has been awarded Certified Licensing Professional status. He works with clients of all sizes to strategically protect, leverage and license their intellectual assets to support and further their business objectives.

Mr. Lee earned his law degree from Georgetown University, and holds Masters and Bachelors degrees in electrical engineering from theUniversities of Maryland and Virginia, respectively.

Mr. Lee is a Trustee and a Vice President-elect of the Licensing Executives Society. He served as Meeting Chair of the LES Winter Meeting 2007 in San Francisco, and is currently Program Chair of the 2008 LES Annual Meeting in Orlando, FL.

SKGF_Presentation_Commercializing Intellectual Property Through Licensing_2008

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