IP Ownership Issues
How to "Write it Right" in Your Agreements
and Corporate Structuring to Avoid
Ownership Disputes Down the Road
ACCA 2011 Double Header
October 5, 2011
Welcome
 Overview of Presentation
 Introduction of Speakers
 Paul Bokota, Toshiba
 John B. Sganga, Jr., Knobbe Martens
 Michael A. Guiliana, Knobbe Martens
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Why Do We Need to “Write it Right”?
 IP is “property” with a Chain of Title
 IP Rights can be divided, transferred and licensed in
many different ways.
 Contract terms in Chain of Title can impact:
 ability to sell IP rights
 ability to enforce IP rights
 who may/must participate in IP litigation
 remedies
 whether the IP suit can continue
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Types of Transactions
 License Agreements
 Financial Transactions
 Industrial Agreements
 IP Services
 International Transactions
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Financial Transactions (Private)
 PPO's
 Mergers and Acquisitions
 Assignment Agreements
 Security Agreements
 Strategic Alliances
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Types of Agreements That Affect IP Rights
 Employment Agreements
 Nondisclosure Agreements
 Visitor Confidentiality Agreements
 Consulting Agreements
 Development Agreements
 Manufacturing Agreements
 Software Escrow Agreements
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Three Areas for Analysis
 IP Rights can change hands many times
 Each transfer raises potential for issues in chain of title
Creators
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Purchasers
Users
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When to Consider IP Ownership Issues
 Hiring creative employees
 Exit interview
 Filing for patent/trademark/copyright
 Issuance of patent/trademark /copyright
 Employee “visitor” at third party
 Joint Development Agreements
 Entering license
 Intra-company licenses/tax planning
 Prior to filing suit
 Prior to financing/corporate transaction
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Creation of IP Rights
 Creation is First Opportunity to Write it Right
 IP Ownership Rights Begin at Creation
 Copyright: Author
 Trademark: First User
 Patent: Inventor
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Patent Rights – Creator Presumed Owner
 U.S. Patent Law and Employment Law Favors Inventor
 At point of invention, Inventor is owner.
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
“Work for Hire/Hired to Invent” - Caveat

Employee Inventors – Employee is presumed
owner, employment agreement can establish
obligation to assign inventions to Company.

Contractor Inventors – Contractor is presumed
owner, Contractor Agreement can establish
obligation to assign inventions to Company.
© 2010 Knobbe Martens Olson & Bear LLP
Internal Creations
 Employee Inventor - Presumed Owner
 Employment Agreement – Specific IP clauses can
transfer ownership and establish obligation to execute
transfer documents.
 Disgruntled Employees might refuse to execute.
 Incentive Programs and Comprehensive Employment
Agreements Achieve Higher Compliance Rates
 Express Consideration for Inventions
 Cash Bonuses for Participation in IP program
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IP Ownership of Outsourced Creation
 Third party assists in product development
Consultant/Developer
 TP presumed owner of inventions
 TP Agreement can establish:

Transfer ownership and obligation to execute
transfer documents

License Terms
 Hostile TP’s might refuse to assign or license IP rights
 Enter TP relationships carefully
 Consultant/Developer Agreement Should Establish
Ownership
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Good Intentions – Bad Ideas
 Good Intentions
 Cooperation
 Generosity
 Fairness
 Reasonableness
 Bad Ideas
 “Agree to Agree”
 Set Royalty Rates Later, If Product is Successful
 Joint Ownership
 Rush to Develop – Decide Ownership Later
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Write it Right
 Employment Agreements
 Declare specific consideration for inventions
 Incentive program
 Consultant/Developer Agreements
 Specify ownership
 Determine license rights at outset
 Royalty Rates – predictable/precise
 Notice provisions for patent filings
 Specify preexisting IP
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Write it Right
 License Agreements
 Include termination date
 Clarify how royalty calculated
 Be specific as to IP licensed
 Who controls litigation
 Define improvements
 Assignment Agreements
 Agreeing to assign vs. actually assigning
 Assignment of past damages
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Write it Right
 License Agreements – pitfalls on term
 Royalties due solely to an expired patent is “unlawful
per se” Brulotte v. Thys Co., 379 U.S. 29, 32 (1964)
 Exceptions:
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
Improvement patents "incorporated" in licensed
products can extend royalties after original patent
expires Zila, Inc. v. Tinnell, 502 F.3d 1014, 1026 (9th Cir. 2007)

Trade secrets licensed

Portfolio-wide patent licensing
Automatic Radio Mfg Co
v. Hazeltine Research, 339 U.S. 827 (1950)
© 2010 Knobbe Martens Olson & Bear LLP
Write it Right
 License Agreements – pitfalls on term (cont’d)
 Articulate administrative convenience/legal ground for
term tied to something other than patent expiration
 Example of what not to do:

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"The royalties shall be paid for so long as the patents to be
issued on said patent application and improvements thereon
represented by improvement patents shall be in existence
and shall terminate on the expiration of such patents and
improvement patents."
© 2010 Knobbe Martens Olson & Bear LLP
Write it Right
 Assignment Agreements – pitfalls
 Backdating agreement

Do: Memorialize prior oral understanding

Don’t: change signature dates!
 Reference to patent or registration number
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© 2010 Knobbe Martens Olson & Bear LLP
Write it Right
 Assignment Agreements – pitfalls
 Agreeing to assign at some future date
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
1st Agreement: “agree[d] to assign” to Stanford “right, title and
interest in” inventions resulting from employment at the
University.

2nd Agreement: “will assign and do[es] hereby assign” to
Cetus “right, title and interest in each of the ideas, inventions
and improvements” made “as a consequence of [his] access”
to Cetus.

Federal Circuit: “the contract language “agree to assign”
reflects a mere promise to assign rights in the future, not an
immediate transfer of expectant interests.”

2nd Agreement trumps 1st, and later patent assignment
 Stanford v. Roche 583 F.3d 832 (Fed. Cir. 2009)
© 2010 Knobbe Martens Olson & Bear LLP
Write it Right
 Developer Agreements – pitfalls
 Agreeing to negotiate royalty rates

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“Contractor has exclusive right to control design
created under this agreement, pending payment of
a reasonable all-inclusive royalty and/or license,
such royalty and/or license being based on the
scope of exclusionary protection afforded, the cost
of producing the design, and the costs for
purchasing alternatives, to be negotiated in a
future agreement with Subcontractor.”
Why does corporate structure matter for IP?
 Impacts ability to enforce IP rights
 Determines who can participate in IP litigation
 Can affect what remedies can be recovered
 May determine whether the IP suit can continue
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Who should retain rights to IP?
 Whoever paid for development
 Whoever gets the tax advantages
 Whoever survived merger/acquisition
 Often ignored:
 corporate entity commercially using the IP
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Who has rights to enforce IP?
Patent
Owner of patent or its exclusive
licensee
Trademark
Registered owner and those who
obtain the right to sue from the
registered owner
Copyright
Copyright owner and any exclusive
licensee
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Who has rights to enforce IP? (cont’d)
 Fact-intensive inquiry
 Use of the term “exclusive” not sufficient; must examine
the actual rights conferred in each license agreement
 Continuum of rights
Owner of all rights with no licenses
Exclusive licensee with right to enforce
Exclusive licensee of a subset of rights
Exclusive licensee subject to pre-existing licenses
Non-exclusive licensee
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How can corporate structure affect IP remedies?
 Can determine whether injunctive relief is available in
patent cases
corporate entity that suffers harm must be a party
to the suit
 Can determine whether lost profits can be awarded for
patent damage
plaintiff must show it would have made sales, or
that profits from sales made by a related corporate
entity “inexorably flow” back to the plaintiff
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Cases where corporate structure affected outcome
 Related corporate litigants have been dismissed where
they lacked standing to bring suit
Spine Solutions, Inc. v. Medtronic, 620 F.3d 1305 (Fed. Cir. 2010)
 Injunctive relief has been denied where the named
plaintiff could not show competitive injury
Medtronic Sofamor Danek USA v. Globus Medical, 637 F.Supp.2d 290 (E.D. Pa. 2009)
 Lost profits have been denied, where named plaintiff did
not make sales and could not show that it was impacted
by the sales made by the infringer
Poly-America L.P. v. GSE Licensing Technology, Inc., 383 F.3d 1303 (Fed. Cir. 2004)
Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008)
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What can you do to maximize ability to enforce IP?
 Make corporate entity selling in U.S. a party to the
lawsuit, either as owner of the IP or exclusive licensee
with right to enforce
 To recover lost profits
 Include the U.S. entity in the suit, or
 Make a showing that profits from the U.S. entity flow
back to the corporate entity bringing the lawsuit
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How can in-house counsel monitor these IP issues to
avoid enforcement concerns?
 Track these issues at the time the IP is generated
 Be aware when these issues could arise
- Tax restructuring
- Updates of intercompany agreements
- Acquisitions
 Work with tax or corporate counsel to address these
issues
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What other intercompany arrangements can impact IP
rights?
 Intercompany patent licenses should require the licensee
to mark the licensed patents
Can impact the time period in which damages can
be recovered
 Intercompany trademark licenses should include quality
control provisions
Lack of quality control could be deemed to be
abandonment of trademark
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Benjamin Franklin on Business Partnerships
 “I very explicitly settled, in our articles, everything to
be done by or expected from each partner, so that there
was nothing to dispute, which precaution I would
therefore recommend to all who enter into
partnerships; for…little jealousies and disgusts may
arise…with lawsuits and other disagreeable
consequences.”
» B. Franklin, his autobiography
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Questions?
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