IP Ownership/Title

NCURA Region VI Conference,
April 3 - 5, 2011
Intellectual Property Demystified
Dianne Archer, J.D.
Stanford University, School of Engineering
Director, Engineering Research Administration
Kate Tallman
University of Colorado, Technology Transfer Office
Director UCB/UCCS
So What, Exactly, Is Intellectual
Definition – Intellectual Property
The four types of intellectual property recognized in
the U.S.:
» Patents
» Copyrights
» Trademarks
» Trade Secrets
Intellectual property are assets developed by the mind
for which the government gives legal protection
» Protection starts in the U.S. Constitution, itself!
NOTE: U.S. law does not protect data, databases, know-how.
Intellectual Property
Concepts common to all IP:
» A government-granted right
» Allows owner to exclude others from using the
material covered by IP rights for a certain period of
» Since owner can exclude, it can also attach
conditions for permission to use
– i.e., license fees, royalties, due diligence
» Or, owner can refuse to provide permission
Data and Know-How:
The Foundation of Intellectual
Data: The Building Blocks of
Intellectual Property
Clauses –
Ownership of IP – US law and/or
employment contracts
» Does not embody any IP rights
» Can be information that is used to create IP
» May or may not be recorded
Data itself cannot be owned
 Issue is usually control of information
» Access can be restricted by contract (e.g., database
subscriptions or confidentiality provisions in contracts.
» Universities need to retain uncontrolled use of it’s data to
assure professors can publish and perform future
research without restriction
» Knowledge “inside your head” on how to do something
» Often protected by industry as trade secret
» Cannot be owned! But access can be controlled by
Promises to license “know-how” are risky
» University does not usually own and cannot compel PI
to disclose
» Cannot even verify existence of know-how
» Cannot assure all know-how was, in fact, transferred
Trade Secrets
“A trademark is a distinctive mark of authenticity
through which products of particular
manufacturers may be distinguished from those
of others.”
Examples include:
Nike swoosh™
Coca Cola® shaped bottle
Stanford tree
University of Colorado buffalo
Generally trademarks do not arise in a university
research context
Trade secrets
 “A ‘trade secret’ means information, including a
formula, pattern, compilation, program, data, device,
method, technique, or process, that:
1. Derives independent economic value, actual or potential, from
not being generally known to, and not being readily
ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and
2. Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.”
Examples include:
» Coca Cola formula
» KFC secret recipe
Universities do not keep trade secrets! But companies
do, thus, confidentiality sections and non-disclosure agreements.
What Is a Patent?
Protects a new and useful process, machine, or
composition of matter, i.e., an invention
» “Anything made by man”
The right to prevent others from making, using, selling,
offering to sale or importing invention.
Must apply to government for patent (not automatic)
Term of patent: 20 years from filing application
» Patents are “prosecuted” for 3-5 years, then get
“issued” by the government
What Is Patentable?
Invention must be
» Novel
» Useful
» Non-obvious
and, both conceived and reduced to practice (i.e.,
proven to work)
Publication affects rights. Cannot patent if not
novel. An invention is not “novel” if it is publicly
known through publications or public use (1 year
grace period in U.S.)
What Is a Copyright?
Copyright protects only the
expression of an idea
» Does not protect facts or ideas
- For example:
protects a report describing the results of a
research project
does not protect the actual ideas, data or
discoveries described in the report
Conveyed automatically when the work is created
and fixed in a tangible form
Grants owner exclusive rights to:
-- Reproduce
 Prepare derivative works
 Distribute copies
 Perform publicly
 Display publicly
Long term: Lasts for life of the author plus 70 years
Long term – life of the author plus 70 years
» 95 years if owned by corporation
Grants owner the right to:
Prepare derivative works
Perform work publicly/display work publicly
Applies to software (software considered a “language”)
as well as books, articles, music, etc.
So. . .Why All The Fuss?
The Fuss: The University View
The Reality: Most inventions developed at the
university are lucky to break even!
» Out of 9,500 inventions in University of California portfolio,
Top 25 make 76% of revenue. (Top 5 make 48%)!
Then why do universities do tech transfer?
» Public benefit. IP protection gives the companies the
protection they need to justify investing millions in developing
a commercial product from early stage academic research.
» Economic Development. Start -ups provide good quality
regional jobs.
The Fuss: Company View
When inventions are valuable, they can be
really valuable
» UC’s top invention, the Hepatitis-B vaccine, earned $16M last
year – that’s only a fraction of total profits received by the
Company concerns:
» The University demanding unreasonably high fees or royalties
» The University having other IP that is required to use or
practice the invention, and declining to license it
» Investing in upfront fees and royalties for an early stage
invention, only to find out it was not really so great
The Fuss: Company View
Different sectors view patents differently
» Pharmaceuticals
– Strong and predictable patents are critical -- Some drug
compounds can be protected by only 1-2 patents
– Exclusive patents -- A single successful drug costs over
$500M to develop (not counting the costs of failed
candidates along the way). Need to protect investment.
– Protective NERFs -- A “blocking patent” can prevent
company from introducing the drug after investment.
The Fuss: Company View
Different sectors view patents differently
» Computer Companies
– “NERFs” -- Tens of thousands of patents could cover one
computer chip. Impossible to control every one, so
concern of infringement liability is high.
– “Background IP” clauses or “subscription agreements” can
be sought to gain access to as much of the university’s
portfolio as possible.
– Copyright may be best! For software companies, patents
are expensive and by the time one is issued 3 years later,
the technology could be outdated.
Intellectual Property in Research
“Putting Theory to Words”
Why Retain Title?
Ensures open dissemination of results
 Ensures availability for future research
 Ensures public interest is met
 Meets 3rd party obligations (inc. federal)
 Implications for tax-free bonds
 Integrity of IP portfolio
 Focus on providing Sponsor with access
and use, rather than title
Ownership should always follow inventorship or
» Determined in accordance with U.S. patent law
Never pre-determine ownership based on
anything but inventorship/authorship
» E.g. “All inventions made in the performance of the
Research shall be jointly owned by Sponsor and
University.” - NO!!
» E.g. “Ownership of any inventions shall consider the
relative contributions of the parties.” - NO!!
Focus on access rather than ownership
Scope of
What’s in the Box?
In the Box
Limit to specific project defined in SOW
» Avoid reaching to unrelated researchers in dept,
campus or university system
» Avoid reaching to PI’s other projects
Limit to period of performance of Agreement
» Avoid reaching to past or future work
Limit to patentable inventions
» Avoid reach to tangible materials, know-how,…
Limit to certain copyrightable works
Conceived and Reduced to Practice
“...patentable inventions conceived and first actually reduced
to practice [or, “invented,” “made” or “created”] in the
performance of research under this Agreement”
» NOT “arising from” or “resulting from”
– These reach indefinitely into the future and can impact a
researcher’s ability to secure future funding
» NOT “conceived OR reduced to practice”
– Reaches to past conceptions (under what funding?) and future
reductions to practice (under what funding?)
» NOT “developed”
– Includes further work on existing complete invention
» NOT “relating to”
– This is extremely broad - it could reach to research anywhere
on campus!
In the Performance of the Research
“...patentable inventions conceived and first actually reduced to
practice [or: copyrightable works first created] in the
performance of research under this Agreement”
» Better yet: “...in the performance of research under this Agreement
as described in Attachment A”
(where Attachment A includes a well-defined SOW)
» Better yet #2: “...in the performance of Research under this
(where “Research” is defined as that described in a SOW)
» NOT “made during the term of this Agreement”
– Not tied to Scope of Work
– Could reach to research anywhere throughout the campus!
Keep obligations to
Sponsor IN the box!
Pop Quiz: How Does This Look?
“IP means all data, information, inventions,
formulas, techniques, processes, concepts,
systems, protocols, programs or devices
(electrical, electronic or mechanical),
whether or not patentable, or subject to
copyright or trade secret protection, that are
created, made, developed or perfected by
University with support from Sponsor.”
The “Kitchen Sink” Definition
“IP means all data, information, patentable
inventions, formulas, techniques, processes,
concepts, systems, protocols, programs or devices
(electrical, electronic or mechanical), whether or not
patentable, or subject to copyright or trade secret
protection, that are created, made, developed or
perfected conceived and reduced to practice by
University with support from Sponsor and in the
performance of research under this Agreement.”
Licensing Rights – the “Basics”
What is a License?
IP owner grants their exclusive rights to
another party by a written agreement:
» Patents: to make, use, sell or import
» ©: to reproduce, prepare derivative works, distribute,
perform publicly or display publicly
» Can be all rights or only a portion of the rights
IP Owner = “Licensor”
 Non-owner = “Licensee”
Licensing Rights
Scope of rights
» Separate patents from copyrights
First right to negotiate (see handout)
» “Option” to negotiate
» Not outright grant
» Not right of first refusal
Time limits to elect and negotiate
 Release of obligations (see handout)
 Financials and Diligence (see handout)
Non-Exclusive Royalty-Free
Licenses (“NERFS”)
How NERFs affect licensing:
» Sponsor can use the technology commercially
without any further payment
– Would you agree to pay patent costs, fees and royalties for
something your competitor uses for free?
– Start-up companies, and many market sectors, are heavily
dependent on exclusivity to raise funds and invest in product
development. A NERF prevents university from ever granting an
exclusive license
» Research agreement NERFS apply even if
Sponsor has absolutely no plans to use
NERFs: Mitigation
Best practices for NERFs:
» Require patent cost reimbursement and/or annual fee to
maintain NERF
– Or, include express statement that university does not have to file
based on NERF alone
» Insert election period to “elect” NERF, and sign a license
» Restrict to “internal research purposes only.”
» Restrict to specific field of use of interest to company (i.e.,
a NERF for aerospace applications only)
» Avoid granting “irrevocable” or “perpetual” NERFs
» Insert statement that sponsor must actively develop
products to maintain NERF (i.e. no shelving of technology)
NERFs and Sublicensing
Avoid NERFs that include “right to sublicense”
» Otherwise, Sponsor can grant permission to a third
party to use your technology and keep 100% of any
fees or royalties it collects!
» Let Sponsor know they can refer any requests for a
license to your university’s tech transfer office
» Can contractually agree to negotiate a license “in
good faith” with any potential licensee referred by
Non-Asserts: “NERFs in Disguise”
What it is: A contract term where the university
agrees “not to assert” particular patents or
copyrights against the company
With this clause, sponsor can use a patent or
copyright for any reason and in any
circumstance, and the university is forever
barred from suing
» Essentially, a very broad, very free license.
Joint Ownership (“NERF in Disguise”)
“Why don’t we just simplify things and jointly
own any inventions?” (Sounds fair?)
The problem:
» Each owner can exploit a jointly-owned invention
with no obligation to the other owner.
– The sponsor gets free commercial use rights, including
the right to license to others (broad NERF in disguise), in
an invention that would have been solely owned by the
» If university agrees to share patent costs, your
resources help create an asset for the company.
A Word On. . Joint Patent Expenses
The issue: Sponsor asks university to pay 50% of
all patent expenses for any jointly owned inventions
» Remember, US rights alone cost $20,000 - $50,000
Avoid this term – creates large, unfunded liability
(particularly if they have right to file for patents)
Work around: if university successfully licenses a
jointly-owned technology, university will reimburse
50% of the costs from the first licensing revenue
received by university (not “owed to”)
Intellectual Property
Background IP (BIP)
What it is: A clause that requires the university to license
any and all pre-existing intellectual property that may be
needed to practice an invention developed under the
How it affects licensing:
» The BIP may already be licensed and unavailable
» The BIP may be capable of being its own product, not just a
side note
» The inventors of the BIP may not be the same researchers
getting the research funding and may not support being
someone else’s “background”
» To the extent it is provided “free,” fair consideration issues.
» A compliance nightmare!
Mitigation of Background IP
First, negotiate it out!
» The sponsor can talk to the tech office before signing the
research agreement to determine if BIP exists
– And, if so, can enter into an option agreement that runs the length of the
research agreement!
Limit access to BIP:
To the extent legally available
To the extent unaffiliated inventors consent
To the extent public benefit principles are not compromised
Limit scope to BIP originating from the specific inventors, lab or
department performing the research project
» Require BIP license to be royalty-bearing and have patent cost
Copyright Licensing
Disclaimer – the views expressed here may not be
consistent with practices at your University
Review on Copyright
Copyright protects only the expression of an idea
Grants owner the right to:
Prepare derivative works
Perform work publicly/display work publicly
Applies to software (software considered a “language”)
as well as books, articles, music, etc.
Software Copyright Assets
Value = person hours X creativity
» Alternatively, it could have trade secret value
Software is never finished
» Software not maintained or updated loses value
Software gains value as people use it
Some software gains value if a community of
developers is formed
The key is to maintain the University as the party with
the rights to all copyrights as the community grows
» Could be University ownership or free license to University
Open Source Licenses
What they are: A copyright owner releases
a copyrighted work (such as software)
under license terms that allow anyone to
use it for free and without obtaining specific
» Many computer science faculty strongly support
the ideals behind open source licenses.
A requirement to open source any software
developed on the project assures free
access by Sponsor
Open Source Licenses
Points to Consider before agreeing to open source:
» Software can have many authors
– Assure all researchers are informed of open source nature and
have change to “opt out” of project
» Not all open source licenses are alike – work with your
tech transfer office to determine best fit for your campus
– GPL as “viral” open source
– Indemnification/disclaimer of liability terms can vary
– See the Open Source Initiative (www.osi.org) for a list of all open
source licenses and their terms
Open Source Benefits
Attracts a user community
 Attracts a developer community
 Build a brand and reputation
If University has rights to all copyrights, it
can offer commercial licenses to later
versions of the software
Public Domain
The issue: in a research agreement, the
university agrees to put all results “in the public
Why it should be avoided:
» Prevents university from securing any patents or
» For technologies that require extensive development, will
prevent commercialization. No company will commit
large sums to develop a product if a competitor can copy
the product without cost or liability
Survival Tips
Engage your technology transfer office
and ask for help. . . . After all, they have
to live with the terms of the award
 Take your General Counsel to coffee
and ask for guidance on the legal issues
(e.g. “shall grant”)
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