Intellectual Property Basics and
Sticking Points for Negotiating
Research Agreements
BethLynn Maxwell, Ph.D., J.D.
The University of Texas System
Office of General Counsel
Presentation to UT – San Antonio
October 26, 2006
Discussion Points


Patent Law Primer
Four Major Areas in Research Contracts

Intellectual Property




Troublesome Clauses in Research Contracts
Confidentiality
Publication
Indemnification
UT - San Antonio Presentation October 26, 2006 - San Antonio, TX
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Patent Law Primer
UT - San Antonio Presentation October 26, 2006 - San Antonio, TX
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Types of
Intellectual Property




Trademarks ~ identifies source of
goods or services
Copyrights ~ protect works fixed in
a medium
Trade Secrets ~ best where the
subject matter can’t be easily
“reverse engineered”
Patents ~ 3 kinds: design, plant and
utility
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The United States
Patent System




Government sponsored “monopoly”;
limited by time and geography
Does not convey affirmative right –
only the right to exclude others
Article I of the Constitution
provides the legal foundation
Administered by the Commerce
Department through the U.S. PTO
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Requirements for
Securing a Patent in U.S.




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
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Statutory Subject Matter ~ category
Novelty ~ new, first to invent
Utility ~ specific, substantial, credible use
Not obvious ~ person of ordinary skill in the
art
Written Description ~ clear and concise
terms
Enablement ~ enable others to make and use
Best Mode ~ to
invention
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San Antonio out
Presentation
October 26, 2006 - San Antonio, TX
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What is Patentable Subject
Matter ? 35 U.S.C. § 101


Novel Subject Matter – new, not
made or done before
 What is the invention? A
process, machine, manufacture,
composition or improvement?
Cannot claim products of nature,
physical & chemical principles
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Utility ~
Usefulness of an Invention

Specific utility


Credible utility


Is the utility specific for the claimed
invention?
Is that specific utility credible?
Substantial utility

Does the utility have real world value?
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Specific Utility


The utility has to be specific to the
subject matter claimed.
Contrast this to a general utility that
would apply to the general class of
invention.
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Credible Utility

Standard is whether a person of
ordinary skill in the art would accept
that the disclosed invention is
currently available for such use


Perpetual motion machines
But, some nucleic acids might be used
as probes, chromosome markers, or
forensic or diagnostic markers
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Substantial Utility



“Real world” use
Must not require further research to
identify or confirm a real world context
Throw away utilities are not substantial
uses unless nature of invention is
specifically directed to such uses
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Invention Can Not Be
Anticipated (35 U.S.C. § 102)

Not anticipated by the prior art



Applicant shall be entitled to a patent unless 1 of the 6
conditions creates a time bar or if the applicant is not
an inventor.
Each and every element of the claimed invention must
not be disclosed in a prior art reference.
Objective standard of someone
skilled in the art of the invention
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Invention Can Not
Be Obvious ~ 35 U.S.C. § 103
An invention is not patentable if the
subject matter of the patent claims, as
a whole, would have been obvious at the
time the invention was made to a
person having ordinary skill in the art
to which the claimed subject matter
pertains.
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Factors to Consider For
Non-Obviousness
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1 – Educational level of the inventor; and
2 - Type of problems encountered in the
art; and
3 - Any prior art solutions to those
problems; and
4 - Rapidity with which innovations are
made; and
5 - Sophistication of the technology; and
6 - Educational level of the workers active
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26, 2006 - San Antonio, TX
Enablement Requirements~
Teach How to Make and Use



Written Description ~ full, clear, concise
and exact terms
Enablement ~ Must enable others to make
and use the invention without undue
experimentation
Best Mode ~ Must present best way to
carry out the invention
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Non-Infringement
Patent Disputes




Inventorship disputes – defining
inventorship is difficult
Interferences – who was the first to
invent
Ownership – research agreements,
MTA’s
Most turn on who did what and when
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One Final Point ~
Patenting Strategies

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Develop a Patent Claim Drafting Strategy
Select Type(s) of Claims
Prioritize Goals for Maximum Protection
Include Licensing Safeguards
Analyze Potential Revenue Flow ~ Carefully Define
Field of Use
Analyze Target Infringers
Address all Statutory Hurdles
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The Big Picture
Synergies exist and great value can be created
Hypothesis
& Theory
Discovery &
Early Dev.
Late Dev. &
Commercialization
Research Inst.
Biotech
Big Pharma
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The Big Picture
Perspectives
Research
Institution
Stakeholders
Concerns
Goals
Objectives
Biotech
Pharma
 Taxpayers
 Government
 Early Investors/VC  Institutional Investors
 Founders
 Board of Directors
 Prestige
 Newsworthiness
 Sustainable Growth
 Top Faculty
 Survival
 National Ranking  Validate the Study
 Meet Projections
 Strengthen Pipeline
 Endowment
 IPO/Market Cap
 Research Grants  Rapid Growth
 Increase R&D
 Productivity
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The Big Picture
Cultures
Research
Institution
Biotech
Pharma
Real Life
 Ivory towers
 Hype
 Tenure
 Heroic founders
 Publish or perish  IPO
 Blockbusters
 Bureaucracy
 Slave to the street
Values
 Expansion of
knowledge
 Expansion of
profits
Assumptions  Risk is removed
 Speed is
subordinate
 Expansion of
market cap
 Risk is embraced  Risk is mitigated
 Speed is life
 Speed is important
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Understanding Who You Are
Negotiating With
Importance
Critical Deal Topics
Publication Rights
Confidentiality
IP
Indemnification
UT - San Antonio Presentation Biotech
Pharma
October 26, 2006 - San Antonio, TX
Research Institution
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Typical Points of Contention –
Critical Deal Topics




Intellectual Property
Publication
Confidentiality
Indemnification
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
Intellectual Property
Concerns
IP Ownership and Inventorship
 All 3 Entities Agree:
 Inventorship follows U.S. Patent
Law
 Rule: Creator owns data/IP
 Exception: Clinical Trial
Agreement
 Ownership follows inventorship
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How is Inventorship
Determined?

Definition



According to US Patent Law
Different from authorship
Why can’t UTSA decide in
advance who the inventor will be
for IP resulting from the
research
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Intellectual Property

Should be Treated Same for All
Agreements



Sponsored Research Agreement
Material Transfer Agreement
Clinical Trial Agreement
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Ideal IP Clause
for All Agreements
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What you invent is yours
What I invent is mine
What we jointly invent is jointly owned
Inventorship follows US patent law
Ownership follows inventorship
$$$ does NOT equal ownership
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Why Can’t UTSA Give
Unknown IP Away To Sponsor
Before It Is Created?

Who owns the IP once it is created?



Board of Regents of The UT System
Use of State of Texas resources, personnel
and equipment
Adequate compensation for IP

How can that be determined if you don’t know
what the IP is?
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Troublesome IP Clauses
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
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Non-Exclusive Royalty-Free License
 Internal research only - Good
 To make, use, and sell, and
sublicensable - Bad
Sponsor Wants to Own Our IP
 Not just a license
Background Intellectual Property
Right of First Refusal
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Non-Exclusive, Royalty-Free,
License in SRAs

Internal, Research Purposes Only




Acceptable; AOK; conforming
Non-transferable
Make sure NERF comes with option to nego
royalty-bearing, sublicensable exclusive
license to make, use and sell
Try to limit all NERF licenses to internal use
only – avoid any language that gives Sponsor
right to commercialize our inventions for
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October 26, 2006 - San Antonio, TX
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Non-Exclusive, Royalty-Free,
License in SRAs
Sublicensable & Right to Make,
Use, & Sell





Non-conforming; LOUSY
Try to negotiate this clause out
Or, reduce to NERF license for internal
purposes only and link to royalty-bearing
exclusive license
Non-exclusive means no exclusive licenses
are offered to anyone else – only non-excl
What if Sponsor
won’t budge? Form G
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Sublicensable NERFs in SRAs


This agreement allows Sponsor a
world-wide, perpetual, royalty-free,
fully paid-up, non-exclusive license,
sublicensable to anyone, to make,
use and sell any Invention created
under the agreement
Form G
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What if Sponsor Wants to Own
Our IP?

Not Okay in Sponsored Research Ag



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$$ does not equal ownership
We should own what we invent
Grant royalty-bearing license, make, use, or
sell
Grant NERF license for internal purposes only
Okay in Limited Instances



Sponsor Initiated Clinical Trial Agreement
Why is it okay here and not elsewhere???
Not Okay inUT
PI- Saninitiated
CTAs. Why?
Antonio Presentation October 26, 2006 - San Antonio, TX
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Clinical Trial Agreements

Sponsor Initiated CTA


Principal Investigator Initiated CTA


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Okay for Sponsor to own IP – Why?
Institution should own IP
Sponsor will usually insist on owning our IP
Jointly Initiated CTA

Both Institution and Sponsor should own IP
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Background IP

What is it?



Stuff you own going into an Agreement
Why would Sponsor want it?
What should you do?


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Problems with Background IP




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Don’t agree to BIP
OR – narrowly define it to one piece of IP
Scope
Identify it
Limit it to one PI
Control it
Compare to Foreground
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October 26, 2006 - San Antonio, TX
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Right of First Refusal

What is it?



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Gives the holder the right to meet any other
offer before the proposed contract is accepted.
When Sponsor has a NERF license and does not
exercise its option to negotiate an exclusive,
royalty-bearing license
AND, reserves a right of first refusal
What Does it Mean?

If you negotiate an exclusive, royalty-bearing
license with another company, before you sign
contract, you have to offer that deal to Sponsor.
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Summary ~ Avoid Pitfalls

When negotiating IP, avoid troublesome
clauses
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NERF licenses to make, use and sell
Sublicensable
Ownership of IP
Background IP
Right of First Refusal
How Can an Agreement get Approved if it
has Non-Conforming Clauses in it?
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What Is A “Form G”
Agreement?
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Form G = Non-Conforming Agreement re:
IP, publication, indemnification provisions
Weigh Benefits Against Risks
Identify Non-Conforming Provisions in
Agreement
Do Benefits Outweigh Giving IP Away?
Administrative Approval/Procedural
Process at UTSA
Form G’s are not discouraged at UT
System
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Form G Process at UTSA



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Form G’s are Not Discouraged
 Important Administrative Authority
Negotiate Agreement
 Can’t negotiate out non-conforming
provisions
Identify Deviations from RRR
Negotiator Transmits Form G to UTSA
President or Delagatee
 What’s in a Form G Transmittal Letter?
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Publication Concerns

When Can We Publish?

What Can We Publish?

Pre-Publication Review Process

What is a Reasonable Delay?

How to Monitor Faculty’s Enthusiasm

Real World Remedies & Deal Breakers
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When/How Can We Publish?
Research Institutions – Non-Negotiable


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Preserve Institution/Principal
Investigator’s absolute right to publish
Sponsor cannot “control” our publication
rights or “approve” contents of
publication
Cross reference right to publish in
confidentiality and ownership of data
§§
Principal Investigator owns the
UT - San Antonio Presentation October 26, 2006 -publications
San Antonio, TX
copyright in his/her
41
When Can We Publish?
Research Institutions - Negotiable

Review periods



Must be reasonable
Balance publish or perish
Length of review period


30 - 60 days for manuscripts and 15 for abstracts – longer
times discussed with and initialed by PI
Delay publication to protect intellectual property
Must be reasonable delay and must be specified
 Average ~ 60 – 90 additional days for filing
Multi-site/center clinical trial studies
 Preserve Institution/PI’s right to publish separate from
multi-site joint publication after reasonable delay
 Reasonable delays permitted until joint publication is
published OR 12 – 18 months after our study is over
(whichever is shorter)


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What Can We Publish?


Research Institutions
We must have an unrestricted right to publish
We want to publish everything



If data and results are made confidential:



Publish or perish – educate faculty
Balance between publishing all versus publishing enough
data to support conclusions
Delete section that makes data/results confidential
Preserve absolute right to publish info that supports
conclusions
Problems with young data (not raw data)

Company/Sponsor wants to delay publishing until data is
matured (or is it now stale?). Data is not like fine wine.
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How to Monitor
Faculty’s Enthusiasm
Research Institutions

Once it is out of the bag …

Educate, educate, educate



Stress importance of “no headlines”
Emphasize their reputation is at stake
Administrative oversight
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

Real World Deal Breakers ~
Publication
Company/Sponsor cannot restrict or control our
right to publish
Deal will go “south” if Sponsor:





Demands to “approve” manuscript/abstract
Insists on unreasonable delay for review before
publishing
Insists on unreasonable delay for filing patent
application
Refuses to cross reference our publication rights in
confidentiality § and § where Sponsor “owns” data
Rarely a deal breaker – but they do exist

Our needs are statutorily
driven and are fair
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Ideal Publication Clause ~
Research Institution’s
Perspective

“Institution shall have the right to
publish or disclose all results of the
research. To the extent that Company
/Sponsor confidential information is
needed to support the publication,
Institution shall have the right to
include such confidential information in
the publicationUTor
disclosure.”
- San Antonio
Presentation October 26, 2006 - San Antonio, TX
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Ideal Publication Clause ~
Industry’s Perspective

“Institution shall not publish or
disclose any results of the research.”
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Publication Clause ~ Reality
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


1.1
Review by COMPANY of Publications Related to Program Technology. Subject to the rights granted to Company under this Agreement,
Principal Investigator will have the right to publish or publicly disclose all technical reports, Program Materials, Program Technology. Subject to the
terms set forth in Sections 8.2 and 8.3 below, in order to avoid loss of Program Patent Rights as a result of premature public disclosure of patentable
information, Principal Investigator and Institution will provide to Company, at least sixty (60) days prior to submission for publication or public
disclosure, any and all presentations, manuscripts and abstracts intended for publication or public disclosure containing any technical reports
submitted to Company pursuant to Section 5.2, Program Materials or Program Technology (in each instance, “Institution Disclosure” or “Institution
Disclosures”). Company will have the right, but not the obligation, to waive all or any portion of the review period described above. Company will
review portions of the proposed Institution Disclosure which Principal Investigator intends as a final draft to be submitted for publication or public
disclosure, as the Principal Investigator makes such portions available, in a manner comparable to its review of a final version for public disclosure;
provided, however, the experiments and results described therein are not materially or substantially modified in the final version of Institution
Disclosure. Any such portions which are materially or substantially modified will be submitted to Company for review in accordance with this Section
8.1. Principal Investigator agrees to include in any publication or public disclosure of the results of the Research Program an appropriate
acknowledgement of Company’s sponsorship of the Research Program. Authorship of any publication disclosing such results shall be determined in
accordance with scientific custom.
1.2.
Protection of Information to be Disclosed in Publications. During the course of the sixty (60) day review period set forth above, Company
will notify Principal Investigator and Institution whether Company desires to file a patent application pursuant to Section 9.3(b) or desires
Institution to file a patent application pursuant to Section 9.3(a) on any Invention disclosed in the Institution Disclosure. Subject to the terms set
forth in Section 8.3, in the event Company desires that such a patent application be filed, Principal Investigator and Institution will delay publication
or disclosure of such Institution Disclosure until the occurrence of the first of the following: (a) filing of a patent application covering such
Invention, (b) agreement by Company and Principal Investigator and Institution that no Invention is disclosed in such materials, or (c) ninety (90)
days after the date that such Institution Disclosure was received by Company from Principal Investigator and Institution. Further, subject to the
terms of Section 8.3, if Company reports to Institution or Principal Investigator that such Institution Disclosure contains Company Confidential
Information, Principal Investigator and Institution will remove such Company Confidential Information from such Institution Disclosure, except for
Company Confidential Information which (i) the Principal Investigator deems is reasonably necessary to support the results which are described in
such Institution Disclosure and (ii) is either sequence information of a transporter molecule provided by Company to the Principal Investigator for
use in the Research Program for which an Identified Key exists or tissue distribution information disclosed by Company to the Principal Investigator
under this Agreement
1.3.
Institution Disclosure Including Identified Key. In addition to the rights and processes set forth in Sections 8.1 and 8.2 concerning
Company’s right to review any proposed Institution Disclosures, and Principal Investigator’s and the Institution’s agreement to delay publication or
disclosure of such Institution Disclosures in accordance with the time lines set forth in this Section 8.3, the Principal Investigator and Institution
agree not to publicly disclose or permit the public disclosure of any Institution Disclosure which discloses any Identified Key until twelve (12) months
following the date that Company and the Institution mutually agree in writing that the Key reported by the Institution to Company is deemed an
Identified Key, all in accordance with the terms set forth in Section 5.3. The parties agree that the first public disclosure for each Identified Key
shall be in a written manuscript to be published in a peer-reviewed
scientific journal. During the twelve (12) month period described in this Section 8.3, the Principal Investigator shall be permitted to submit to a
scientific journal for publication, any abstract or manuscript which discloses an Identified Key, provided that, the Principal Investigator and the
Institution notify the Company Principal Investigator of their desire to do so prior to any such submission and each provides Company with reasonable
assurance that publication of such manuscript or abstract shall not occur prior to the twelve (12) month period described above. For clarity, the
terms set forth in this Section 8.3 shall not in any manner limit Company’s right to review any Institution Disclosure which discloses an Identified
Key in accordance with the time lines set forth in Sections 8.1 and 8.2.
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Confidentiality Concerns
Research Institutions vs. Biotech Company vs. Big
Pharma


Length of Confidentiality Obligations
 Balancing Reasonable with Realistic
How to Prevent Leakage
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Confidentiality ~ Length



Research Institutions
 Length must be reasonable and must be a date certain
(statutory retention)
 3 years after agreement ends –not from disclosure
date
 Rare exceptions – Principal Investigator must agree
and initial confidentiality provision
 Huge burden on PI and Institution
Biotech Company
 5 years from each disclosure date
Big Pharma
 Follow statutory limits, normal time frame of 5-10
years
 End date must be explicitly defined
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October 26, 2006 - San Antonio, TX
How To Prevent Confidentiality Leaks


We Agree . . .
 Education, communication and good
contract management are critical
We Disagree . . .
 Starting length of obligations from “end
of agreement” vs. “date of disclosure”
 Explicitly naming all persons bound by
agreement – should be PI’s responsibility
 Unrealistic in Research Institution
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Indemnification Concerns



Needs
Allocation of Risk in Clinical
Setting
Real World Deal Breakers
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Our Indemnification Needs



Seek broadest indemnification possible
Full indemnity – Sponsor’s drug/Sponsor’s protocol – Institution
does what Sponsor says (“arising out of the activities…”)
Product liability

Defects in design or manufacture of drug

Sponsor’s negligence

Use of Institution’s results - least amount of coverage




Institution’s protocol; and
Sponsor has little or no control over what Institution does;
Then Sponsor must indemnify Institution for Sponsor’s use of
Institution’s results
Institution can only indemnify Sponsor for Institution’s
negligence (to the extent authorized by Constitution and laws
of State of Texas
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Our Indemnification Needs

Must include proper parties


Should cover all kinds of claims



“Arising out of the activities to be carried out under this
Ag”
Should also include Sponsor’s use of our results
Carve-outs


Claims, demands, costs, liabilities, or judgments
Should broadly cover us if we do exactly what
Sponsor directs us to do – “Full Indemnity”


System, Regents, Institution, officers, employees, agents
Our negligence voids Sponsor’s indemnification
If Sponsor wants to control the defense – “subject to
the statutory duties of the Texas Attorney General”
UT - San Antonio Presentation 55
October 26, 2006 - San Antonio, TX
Indemnification ~
Allocation of Risk

Sponsor’s Protocol and Sponsor’s Drug





We receive no $ from Sponsor after Study is done
Sponsor stands to gain a lot of money from the study
Sponsor must broadly indemnify us if we do exactly what
Sponsor directs us to do (“Full Indemnity”)
Institution’s Protocol and Sponsor’s Drug
 Sponsor should bear all risk b/c it stands to gain a
lot financially
 Sponsor must also indemnify us for its use of our
results
Sponsor can control defense and settlement only …
 “subject to the statutory duties of the Texas
UT - San Antonio Presentation 56
Attorney General”
October 26, 2006 - San Antonio, TX
Indemnification ~
Real World Deal Breakers




Sponsor won’t broadly indemnify us for
following their protocol and using their
drug
Sponsor wants a mirror indemnity - not
only ‘as to our negligence’
Sponsor won’t indemnify us for its use
of our results (standard CTA and
principal investigator initiated protocol)
Sponsor won’t agree to include language
UT - San Antonio Presentation that allows them
to control defense
57
October 26, 2006 - San Antonio, TX
SUMMARY

Critical Deal Concepts That May
Profoundly Impact Your
Negotiations:
 Intellectual Property
 Publication
 Confidentiality
 Indemnification
UT - San Antonio Presentation October 26, 2006 - San Antonio, TX
58