Licensing professionals globally deal with the same product—intangible assets of Intellectual Property. Licensing professionals must be able to communicate across international borders, appreciate the impact of different languages, ethics and cultures. In addition, they must also be able to maneuver within the matrix of laws, policies and practices that exist in different nations, organizations and industries.

What:

“Detecting Patent Infringement” A Holistic, Global Approach,” a panel discussion at the LES 2009 Winter Meeting that will investigate the best practices and methodologies used by the most aggressive licensing companies to fully protect their patent portfolios.

Who:

• Julia Elvidge, Chipworks President, Chipworks
• Lisa Jorgensen, Vice President of Intellectual Property, STMicroelectronics
• Robert Rodriguez, Senior IP Licensing Counsel, Freescale Semiconductor

Where:

LES 2009 Winter Meeting
Westin Riverwalk Hotel
San Antonio, Texas

When:

Thursday February 26, 2009
2:00 – 3:15 p.m. Workshop Session 1

More Info:

Phyllis Grabot
Corridor Communications, Inc.
805.341.7269 or Phyllis@corridorcomms.com

Founded in 1966, the Licensing Executives Society (U.S.A. & Canada), Inc. is a professional society comprised of over 6,000 members engaged in the transfer, use, development, manufacture and marketing of intellectual property.

Related posts:

1. Book Review Monday: Intellectual Property Culture
2. WIPO Publishes Booklet On Negotiating Technology Licensing Agreements
3. See the Global Reach of Biotechnology at BIO 2008 in San Diego

In the category of solutions looking for problems to solve, Planet Eureka! is a new on-line marketplace for patents and other intellectual property rights by Eureka Ranch Technologies in Cincinnati, Ohio.

Planet Eureka! Offers the USA National Innovation Marketplace as a way to bring together buyers and sellers of intellectual property. The Marketplace offers a place where inventors, patent holders, and intellectual property owners can post ideas in search of partners, buyers, and licensees.

Access is free to sellers and buyers but future plans include charging for consulting and other services. This site is from Doug Hall of American Inventor infamy.

InnoCentive

Another site, InnoCentive, provides a way for companies, nonprofits, and government agencies looking for solutions to problems to find the people and organizations that have answers. Charges $15,000 to post a problem as well as 40% commission on amount paid to the solution provider.

InnoCentive’s Open Innovation community is a way to get large numbers of members to try to solve some of the problems facing the world today. Those who are successful can win cash awards of up to $1,000,000 for solutions to Challenges. The site is a spin-off of Eli Lilly.

WikiPatents Community

Yet another patent marketplace is WikiPatents Community, which claims to contribute to the US patent system by reviewing issued patents and pending patent applications. WikiPatents features a wiki-like interface to review, rate, and discuss patents — plus free patent PDF downloads, file histories, and advanced patent searching.

The site also offers WikiPatents Marketplace, where companies can list patents for sale. IP is listed using various package deals ranging from $89/month to $1999/year.

What’s not clear is how members are able to vote on the value of any particular invention. The numbers for estimated value, royalty rate, market share and market size seem to be pulled from thin air. My favorite is U.S. Patent 7,095,126, entitled “Internal energy generating power source,” which claims:

1. A system for generating energy such that a portion of the generated energy supplies power to the system that generated the energy comprising: an electric motor capable of producing electric energy; a power source for supplying an initial amount of power to said electric motor; an alternator power source connected to said initial power source and said electric motor for continuously supplying power to said electric motor; a first inverter system connected to said electric motor, said inverter having an input through which said inverter system receives energy produced by said electric motor, said first inverter system also having one output through which said first inventor supplies power back to said electric motor to supply said electric motor with power; a load connected to said first inverter system via an inverter system output to alter the electric current traveling from said first inverter system such that the current feeding into the electric motor 30 is not purely inductive.

I think I’ve seen this perpetual motion machine before. Expect many of these to show up on Geekologie.

Related posts:

1. The Price of Pharmaceuticals
2. Are Tax Breaks for Biotech Worth the Price?
3. What Price Therapeutics?

“Most of us would prefer not to work with” the UC System, [Don] Francis [chairman and executive director of the South San Francisco nonprofit Global Solutions for Infectious Diseases and co-founder of Vaxgen, Inc. of South San Francisco] said at a recent UCSF forum on product development partnerships.

Another issue is (at least the perception) that the University is too risk-adverse:

Deals must pass “the Chronicle test,” said Jack Newman, a UC Berkeley graduate and now senior vice president of research at Amyris Biotechnologies Inc. in Emeryville. In other words, UC system lawyers want to be sure no one — those pesky media types, in particular — can accuse them of giving away too much value.

As with most axioms, there is some truth to these assertions. But, as they say, there are always two sides to every story. Since I used to direct patents and licensing at a major university technology transfer office and now work in private practice helping biotech companies deal with universities, I have the unique distinction of having been on both sides of the fence. And, like many things in life, it’s always easy to criticize the other side.

So, what is true?

1. Universities are risk-adverse. True. Now get over it.

Trying to get a nonprofit research institution — especially a public funded university subject to state laws and regulations, union agreements, freedom of information act requests, and general, all-around status as public punching bag — to strive to take business risks in the hopes of a big payoff is just not going to happen.

Take a look at the UC System Mission Statement:

The distinctive mission of the University is to serve society as a center of higher learning, providing long-term societal benefits through transmitting advanced knowledge, discovering new knowledge, and functioning as an active working repository of organized knowledge.

Note that nowhere does it say anything about its mission being “making money for commercial ventures.”

Although, neither does Google’s but most mission statements are not terribly useful. As Guy Kawasaki noted:

The ultimate test for a mantra (or mission statement) is if your telephone operators (Trixie and Biff) can tell you what it is. If they can, then you’re onto something meaningful and memorable. If they can’t, then, well, it sucks.

In a university, there is very much an environment where no one gets fired if the deal doesn’t happen. You get fired when the deal causes a loss. In some public universities, there are even state laws that prevent the university from taking on any unfunded liabilities. All this aside, there is, in fact, always a fear of being at the center of an i-Team investigation for having given valuable university assets to a for-profit company — a loss at taxpayers expense. There are some newspapers that take particular pride in the sport of skewering public officials and employees be they in government or universities.

2. Universities take too long to get deals done. Half-true. Now get over that, too.

There are generally two causes of this effect: procedures and staff.

First, universities are risk adverse (see point 1) and hence, agreements have to be signed-off on by all the various stakeholders. This is where universities’ and private companies’ interest and expectations diverge the most. At a company, you have one stakeholder, the company (shareholders). At a university, there are many. For starters, any royalty received in a licensing deal is split between the inventor(s) and the university. In terms of the university’s portion, that revenue is generally split among the university, the college, and the department (or some sort of fee split). Hence, all of those parties are (usually) asked to initial their acceptance of the terms. Mostly, this is done because no one wants one of the parties involved to come back later to contest the deal.

Second, but perhaps more importantly, universities are typically not over-staffed. This has to do with mission priorities (see No. 1 above) and with budget restraints. University budget surpluses, like unicorns, sound nice but I haven’t seen one yet. This means that the personnel that must draft, review, negotiate and manage university licenses and contracts have an overflowing in-box. That’s just the way it is. Many universities are certainly improving and putting more resources into licensing and technology transfer but I would expect hiring to lag need.

However, there are ways to speed this up on both sides. Mainly, it helps to recognize university restraints and not try to negotiate points they won’t (or, more likely, can’t) negotiate like indemnification, disclaimer of warranties, retention of ownership, governing law, waiver of liability, and oh, did I mention indemnifications? Trying to argue over these types of provisions is, like cursing the darkness, a futile exercise (see No. 1 above).

3. The parties often have unrealistic expectations. True. Now let’s fix it.

Keeping the above points in mind, it is critical that companies and universities come into the process knowing the limitations of a university and work with the system, not against it. If you know it takes longer to get the deal done, start earlier. The number one offense? Waiting until the last minute to get a deal done. Don’t stop in on Friday afternoon saying you need this done before the weekend.

Also, as above, don’t come in expecting to get everything and give nothing. Too often, complaints about tech transfer offices come down to “They won’t give me everything I want! That’s so unfair!” Taking too long is often the result of too many back and forth negotiations as the parties try to get their way.

Of course, unrealistic expectations are a perennial problem with universities, too. There are still some universities that think that every invention is worth a fortune (“Why else would you be interested in it?“). Furthermore, tech transfer personnel are notoriously bad at understanding the realities of product research and development and the fact that a mere lead on an eventual product is not the total value of the end product.

University inventions are often early stage, undercooked ideas that more often than not fail to deliver and, even when things work out, need lots of development and still fail to deliver a big hit. Universities often fail to fully appreciate the tremendous costs and risks involved with taking on a raw, undeveloped idea and trying to turn it into a viable product on the marketplace.

There is a lot of money to be made so I think it’s in everyone’s best interest to work well together. My number one tip for those working with universities is to be pleasant and treat the other side with the respect and dignity you would want to receive in return.  People are human and — while it may not be right — will often respond to a demanding jerk by acting the same.

If others have ideas on how to deal with universities and the length of time to get deals signed, please let me know.

See also:

Biotech Companies Running into Roadblocks in Entering into Deals with the UC System

Trouble With Tech Transfer…Or Expectations?

Related posts:

1. IP Management for Universities
2. No Corporate Ownership by Universities in Arizona
3. Universities Creating Fewer Start-ups

Previously, a company had to stop paying royalties on a patent license to challenge the validity of the patent. In an 8-to-1 decision, the Supreme Court ruled that a licensee could sue to challenge the validity of the underlying patent even while it continues to pay fees to use the disputed technology.

In light of these developments, I think it is important to deal with the impact and decide where to go from here. Below, I have outlined a few points that should be considered in future licensing agreements.

Venue

There can be an issue where a big company licensee takes the license to remove the threat of treble (triple) damages for willful infringement and then turn around and sues in their hometown jurisdiction. The ability to select the venue is quite powerful, especially if the licensee is a small company that cannot afford higher legal bills to defend the suit. Plus, you do not want the other side to have a “hometown advantage” where all the potential jurors have a natural bias to “their” company. Therefore, a licensor may want to insist on a venue clause such as:

Jurisdiction. Licensee consents to the exclusive jurisdiction and venue of the federal and state courts located in Hamilton County, Ohio, United States of America, in any action arising out of or relating to this Agreement. Licensee hereby explicitly waives the rights to any other venue to which it might be entitled by cause of action, domicile or otherwise.

No Contest Clause

Licensors must take into account that if they agreed to license out their technology, especially to a large company or other deep pocket, they may have to spend millions just to defend their patent, all the while being prevented from suing for infringement or terminating the agreement — this is a huge risk for a small company without the resources to defend itself. Therefore, a licensor may want to include a clause that the licensee agrees not to contest the patent. This may not hold up but one could include a clause that the license terminates immediately upon any action taken against the patent. That way, the licensee at least has to think twice since, if they are unsuccessful, they’ll be left hanging without a license and you can bet any second license agreement will not be very favorable.

No Contest Clause. Licensee agrees not to directly or indirectly challenge or cause to be challenged the validity or enforceability of any Licensed Patent, or Licensor’s ownership of any Licensed Patent, before any court, agency or tribunal, unless Licensee is charged with infringement of any Licensed Patent by Licensor or its affiliates. Licensee acknowledges that any breach of this clause will be cause for immediate termination of this Agreement.

While agreements not to contest the validity of a patent have generally been held to be unenforceable, they have not been held to constitute an antitrust violation or misuse. Therefore, the best bet is a termination upon challenge.

Front Load Fees

A licensor may want to try to get as much money as possible up-front or early in a license so that in the event of a challenge and loss of patent, they have as much money in hand before the challenge. A licensor may want to ask for a large upfront payment coupled with lower royalty rates or yearly fees. The licensee will have less incentive to challenge if it has already paid a substantial fee and remaining fees are not a burden. Also, keep in mind that a license agreement with more modest terms overall may be less likely to be challenged. The more onerous the license terms, the more likely the licensor will have an incentive to challenge the validity of the patent.

Get Your Ducks in a Row

I can’t say it enough, the best, overall strategy is to not give the licensee a good reason to challenge the patent in the first place.  If the stakes are high, you can be sure that the licensee will seek out any weaknesses in the patent prosecution history or any clouds on the title.  Before you even get to the licensing stage, make sure to follow these critical rules to plug gaps that could occur in your IP protective armor:

1. Make sure you have all your agreements in place to ensure that your ownership rights are in place. The first questions is always “Who owns the IP?“, it is important to nail down ownership in writing. Look at the ownership of materials from outside entities and if a license is required for commercial use.

2. Make sure you know who the true inventors are of any patent. In the U.S., improper inventorship may invalidate the patent so make sure there are written records of who invented what, when and where. Be especially careful of IP arising during collaborations with people outside your organization and look for any avenues someone could claim to be a co-inventor.

3. Keep very good records. Since inventorship is dictated in the united states by the first to invent rule (invention is conception coupled with reduction to practice), invention is proven by due diligence and good record keeping. Make sure all development records are permanent + complete + continuous.

4. Check compliance with regulatory procedures, e.g., government reporting for inventions made with government funds.

Let’s be careful out there.

Related posts:

1. Genentech v. MedImmune Briefing
2. Supreme Court High-Fives MedImmune
3. MedImmune Asks: What’s A Patent Lawsuit Among Friends?

David Hricik
Mercer Law School
(I’m not affiliated with the firm that owns this site)

Related posts:

1. MedImmune v. Genentech
2. California Supreme Court to Review $500 Million Judgment Against Genentech
3. Genentech Puts Science Over Commercial