Intellectual Property Workshop Marc T. Morley October 15, 2019

Intellectual Property Workshop Marc T. Morley October 15, 2019 Mintz Levin. Not your standard practice.

Outline Patent basics Patent applications & prosecution Patent strategy & searching Investor considerations & due diligence Working with your patent attorney 2

Constitutionally Granted Monopoly Constitution – Article 1, Section 8, Clause 8: – To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. US is unique in that the right is in the constitution. In other countries, it’s merely a statutory right. This monopoly, or exclusivity, is what investors are paying for 3

But for a Limited Time Patent term is for 20 years, starting from the earliest nonprovisional priority date – Used to be 17 years from issuance Can be extended some due to delays at the patent office and/or FDA regulatory review Upon expiration of the patent, the subject matter is in the public domain and free to be practiced by anyone (assuming there is no other patent encompassing the subject matter) 4

Importance of Patents Competitive business advantage - “Speed bumps” & “Barriers” Revenue stream from licensing Access to others’ technology via cross-licenses Leverage - Patents are a sword, not a shield Demonstrate viability and value to investors Ability to collect damages via litigation Reasonable royalty / lost profits / hybrid approach Enhanced Damages for willful infringement 5

Timeline: Get Ready to Practice Patience Development and optimization of invention Filing and prosecution of patent application 0 1 Filing provisional patent application 3-7 years Maintenance & Enforcement of patents 21 6

OK, So Did We Invent Something Or Not? If in doubt, assume that you did Exploratory questions: – “What do we do that gives us a competitive advantage?” – “How do we maintain this competitive advantage?” – “What barriers to entry can we create for potential competitors?” – “What would a competitor want to copy?” – “What problems did we encounter and how did we solve them?” Look at the “core” technology, “interfaces” to the core technology, ancillary aspects, consumables, and the like 7

Now what? Don’t tell anyone outside your organization no papers, no presentations, no disclosure – Doing so could forfeit protection in foreign jurisdictions, and trigger a 1-year clock for filing in the US – Disclosure under a Non-Disclosure Agreement is okay; but better to file a patent application first Contact your tech transfer office/legal department/patent attorney 8

What’s the Patent Attorney Going to Want? A sentence or two summarizing the advantages of the invention, the problems overcome relative to prior technologies, failures etc. A detailed write-up of the procedures practiced to generate the invention – Something along the lines of an experimental section from a paper Data & figures needs to demonstrate that the you can do what you’re claiming, and hopefully includes comparative data showing improvements in comparison to the state-ofthe-art 9 Any presentation or draft manuscript describing the invention

Is the Discovery/Improvement Patentable? Any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof (35 USC 101) – Not a composition as found in nature; not a natural process What kinds of things can I patent or are potentially eligible for patenting? – Processes/Methods (methods of use, methods of making, methods of dosing ) – Machines – Manufacture – Compositions of matter (small molecules, nucleic acids, polypeptides, cells, antibodies, intermediates ) – Improvements 10

Is the Discovery/Improvement Patentable? Must be novel (35 USC 102) all claimed elements are not found in a single pub, in the precise claimed combination or orientation – A device with elements ABDC is novel over a device ABCD having the same elements, but arranged differently Must be non-obvious (35 USC 103) claimed elements not found in pub combo and/or has a surprising advantage over the prior art – ABDC device likely needs to show surprising advantage over ABCD device 11

When to File 12

When to File US is a first-to-file jurisdiction, as are all foreign jurisdictions, so it’s a race to the patent office But you need data to support the application and ensure a right to the provisional filing date, so best to obtain data before filing Consider whether to file prior to meetings with investors or collaborators irrespective of data FILE PRIOR TO PUBLICATIONS, SEMINARS OR ANY PUBLIC DISCLOSURE! 13

Inventorship An inventor is someone who contributes to the conception of the invention This is different from authorship, as someone who performs experiments (reduces the invention to practice) is not necessarily an inventor – Experimenters can be inventors if they encounter a problem that they solve, and without which the invention could not have been reduced to practice Inventorship is a claim-by-claim determination An inventor has an undivided interest in the invention, even when there are multiple inventors Important to make an effort to get this right as a patent with the incorrect inventorship is invalid 14

Inventorship Scenarios Adam conceives of an idea for a new solar cell stack. Adam asks Ben to make the solar cell stack. Ben does so without encountering any problems. A patent application is filed listing Adam as the sole inventor. Same scenario, but Ben encounters a problem using the literature procedure that he solves without consulting Adam. The invention could not have been made without Ben solving this problem. A patent application is filed listing both Adam and Ben as inventors. 15

Inventorship Scenarios II Carl and David are both Ph.D. scientists working for different companies but have been trying to find ways to collaborate. Carl has a new material for a solar cell, and they are trying to determine how best to incorporate the material into the solar cell to maximize efficiency. After several weeks of discussion, Carl and David have not solved the problem. Another week passes, and David, alone, has an insight that solves the problem. David wants to file a patent application without listing Carl as an inventor. A patent application is filed listing both Carl and David as inventors. 16

Inventorship Scenarios III Chemist discovers a new chemical compound that kills leukemia cells. Chemist approaches Professor at University to test the compound on Professor’s lymphoma cell line suspecting it likely is effective against it. Professor confirms that the compound works very well against the cell line and shares the optimal lethal dose with Chemist. Professor tells Chemist “I did not discover anything here, you own it.” Who owns the invention of treating lymphoma with the compound? A. Chemist B. Professor C. University D. All of the above E. Chemist and University 17

Inventorship Scenarios IV An artificial intelligence device discovers a new design for a container for more efficient storing of multiple containers? 18

Patent Applications 19

Timeline of Process: 3 Key Filings Enter File PCT, Foreign File US & Countries provisiona Direct (& US) l Countries from PCT applicatio (TW) n 0 1 2.5 years Patent Issues 3-7 Maintenance & Enforcement of patents 21 20

Types of Applications: Provisional Typically the first application filed Not prosecuted; merely a placeholder as it expires after 1 year Does not trigger the 20-year patent term clock No requirements on content since it is not prosecuted, so it can be filed quickly and inexpensively, a “thin” provisional But, you get what you pay for, and risk losing your priority date if a thin provisional is filed, particularly in Europe 21

Thin Provisional Scenario Applications claiming priority to “thin” provisionals risk losing their priority date because of weak support, allowing an intervening publication to become prior art and negatively impact the patentability of the claims. Enter Foreign File PCT, US Countries & Direct (& US) from File PCT provisional Countries (“National (TW) application Phase”) 0 g in n n e o rv ati e t ic In bl pu 1 2.5 years (30 Months) Patent Issues 3-7 Maintenance & Enforcement of patents 21 22

Applications: PCT Another placeholder application; preserves the right to file in most foreign jurisdictions and the US Delays prosecution for another 18 months Must be a complete application (claims, specification, examples, figures, etc.) – Oftentimes simply updating a well-written provisional application with new data – Filing fees of 5k Triggers the 20-year patent term clock – Since no application is being prosecuted to a patent, using the PCT route results in a loss of 18 months of patent term because the start of prosecution is delayed 18 months, thus delaying issuance of a patent – But this is a reasonable trade-off for many technologies and start-ups since substantive prosecution costs are also delayed 23

Applications: Non-PCT Countries Taiwan, Argentina, and a few others Not members of WIPO, so patent applications must be filed directly in each of those jurisdictions simultaneously with the PCT application – Translation costs in most of these jurisdictions 24

Applications: National Phase Deadline is 30 months from the earliest priority date (typically the US provisional filing date) – Some countries provide an extra month, and are referred to as 31-month countries (i.e., Europe) Registration of the PCT application in those jurisdictions where a patent is sought – Typical jurisdictions: US, Europe, China, Japan, Canada, Australia Can be a big cost item depending on the size of the application and the number of jurisdictions: 25k to 100k – These are filing & translation fees; little substantive attorney time is required at this stage 25

Where to File Market size where are the paying customers Manufacturing center Transportation centers (Hong Kong, Singapore) makes patents in markets life difficult for a without customers competitor to bring can prevent the infringing infringing products product to market from being produced if they can’t ship the product through 26

Applications: US Non-Provisional Filed from the PCT application, or directly from the US provisional application in parallel with a PCT application – Can also be filed direct as the first application – Filing triggers the 20-year patent term clock, if not already triggered by the PCT applications Undergoes substantive prosecution Can seek expedited review 27

Applications: Flavors of US Applications Non-provisional: can be a first filed application, filed as a firstfiled application, from a provisional, or via the PCT application Continuation: filed from an existing US non-provisional application to pursue claims of similar subject matter Divisional: filed from an existing US non-provisional application to pursue additional claims the PTO says are separately patentable Continuation-in-part: filed from an existing US non-provisional application, where new examples and/or figures are added to the specification 28

Patent Family Tree Provisional Application A, B, C, D PCT Application A, B, C, D, E U.S. Patent – Claims to A EP Patent U.S. Patent – Claims to B CA Patent U.S. Patent – Claims to C CN Patent JP Patent AU Patent KR Patent BR Patent Pending U.S. NonProvisional Application – Claims to E 29

Preparation & Filing Cost Provisional: 10-15k , depending on the scope and strength of the application US Non-provisional: 1k in filing fees – May involve some attorney fees as well if there is new data, or depending on the condition of the provisional application that was filed PCT: 5k in filing fees – May involve some attorney fees as well if there is new data, or depending on the condition of the provisional application that was filed Direct filed jurisdictions: Often include translations 30

Preparation & Filing Cost II National Phase filing: 25k to 100k – These are filing fees; no substantial attorney time is required at this stage – US is about 2k; Europe is about 10k; translations required in China, Japan, Korea ( ) – 50k could include US, Australia, Europe, Canada, China, & Japan (depending on the size of the application) US Continuation, divisional, continuation-in-part: 1k in filing fees; 0-3k in attorney time for new claims 31

Patent Prosecution (examination/review of the application) 32

US Formalities For US application, the attorney will ask for your signatures on an assignment, a declaration, and a power of attorney The assignment assigns your rights in the invention to your employer – Should be obtained for any provisional, PCT application and US non-provisional application not filed from a PCT application The declaration is an acknowledgement by the inventor to the USPTO that the inventor is the original inventor, has read and understands the application, and that all information provided to the USPTO is material to patentability – Signed under penalty of perjury The power of attorney grants the attorney the right to act on your behalf to prosecute the patent application – A separate power of attorney is needed for each jurisdiction 33

Foreign Formalities Assignment required in many foreign jurisdictions but can use the assignment obtained for the PCT application But, many smaller jurisdictions in Asian, South American & Middle East require “legalization”, a process of sending the documents to an embassy or consulate in the US to review and approve the documents A separate power of attorney is needed for each jurisdiction 34

Timeline of Process: Prosecution Enter Foreign File PCT, US Countries & Direct File provisional Countries (& US) from PCT (TW) application 0 1 2.5 years Patent Issues 3-7 Maintenance & Enforcement of patents 21 35

Timeline of US Prosecution National Phase 2.5 Restriction Requiremen t (2-month initial deadline; extendible by 5 months) Non-Final Office Action (3-month initial deadline; extendible by 3 months) Response to Restriction Requiremen t FINAL Office Action (3-month initial deadline; extendible by 3 months) Response to Non-Final Office Action Allowance Response to Final Office Action 5-6 Patent Issues 3-7 36

Is My Invention Patentable? Must meet statutory category of subject matter (35 USC 101 – machine, composition of matter, methods, etc.) Must be novel (35 USC 102) Has anyone else done the exact same thing? Must be non-obvious (35 USC 103) Is my innovation inventive enough? Quid Pro Quo (35 USC 112) Have I put the public in possession of the invention in adequate detail and taught how to make and use the technology? 37

Prosecution Vocabulary Restriction Requirement: where the PTO considers the claims to cover at least 2 inventions, the PTO asks the Applicant to pick one invention to be searched and examined because only one invention can be searched and examined – Unelected inventions can be pursued in one or more divisional applications Species election: oftentimes a secondary request in a Restriction Requirement for the Applicant to pick a single example the PTO will use as a starting point for the search – This does not restrict the claims, unless the exact combination of elements selected is found in the examiner’s search 38

Prosecution Vocabulary Non-Final Office Action: following an initial review of the patent application and a search, the PTO rejects the claims as not patentable Response/Amendment: Applicant’s response to the Office Action that includes claim amendments and remarks to the rejections Final Office Action: a second office action – Final in name only, as you can continue prosecution by paying a fee (Request for Continued Examination) to rescind the finality of the Final Office Action 39

US Duty of Disclosure USPTO has a duty of disclosure that applies to the patent attorney, the inventors, and anyone else involved with filing and prosecuting the patent application The duty requires disclosure to the USPTO of documents and references that may be relevant to the patentability of the invention – This disclosure is called an Information Disclosure Statement (IDS) The duty is satisfied by providing the patent attorney with relevant references you are aware of – Does not need to include all references you are aware of, or duplicative references that include the same or similar description provided by another reference already cited 40

Foreign Prosecution Prosecution begins 1-5 years after entry, and only after a Request for Examination is filed and a fee is paid another delay mechanism for the applicant to consider whether the application should be examined or abandoned – Also a fee-generating opportunity for the foreign patent office Prosecution then proceeds with one or more office actions Deadlines may be extendible, depending on the jurisdiction Some jurisdictions operate by setting an Acceptance deadline from the first office action a deadline by which time the application must be placed in condition for allowance, typically 1-year – Must be more timely in responding and more proactive with claim amendments 41

Strategy & Searching 42

IP Strategy Filing strategy Defensive filings Accelerated filings International filings Trade secret v. patents Other Forms of IP: Trade Secrets, Design patents, Plant Patents, Plant Varieties & trademarks 43

Design the IP to Maximize Value For patents: pursue multiple patents and multiple types of claims to best protect the technology and its improvements – Product/Composition of Matter claims – Method of using claims – Method of making Cover your product and its improvements Cover improvements on your competitors' products (leverage) Later filings provide the opportunity to obtain protection in additional foreign jurisdictions especially where earlier filings were filed more conservatively 44

Design the IP to Maximize Value 45

Prioritizing Filings from Lots of Ideas Cover the contemplated commercial product Cover a competitor’s product Consider deprioritizing methods of making/screening Does the filing create value? 46

More on Maximizing Value Revisit the patent strategy at least once a year Has the contemplated commercial product changed, or are there new aspects? Do the existing patent filings continue to provide protection? If not, are the existing filings worth maintaining? 47

IP Strategy: Accelerated Applications Consider where an issued patent would help with fund raising or for enforcement US non-provisional as the first application – Accelerates by 1-year the start of the 20-year patent term, but potentially enables enforcement that much sooner Track One: application receives priority attention at the USPTO, with the goal of issuing a patent within 1-year of filing – Filing fee is about 2-3x the regular fee – No extensions of time are available – Best to pursue narrowed claims focused on a commercial embodiment “Special Status” Certain circumstances can qualify for accelerated or “special” examination (applicant health, age, certain technologies) Alternative simply pursue focused claims from the beginning, and respond quickly 48

IP Strategy: International Filings Costly endeavor – Translation costs to enter – Parallel prosecution costs in multiple jurisdictions – Annual fees in each jurisdiction just to maintain application in good standing – Multiple fee-generating opportunities (Request for Examination) Trade-off is patent protection in more markets leading to greater value File broadly only for cornerstone technologies 49

Enforcement: A Right to Exclude 35 USC 271(a): Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. There is no right to practice your own invention 50

What is a Trade Secret? Information that is valuable because it’s secret –Owner must make reasonable efforts to maintain secrecy (e.g., NDAs) –Protection lost if becomes public (unlike patent protection) Examples: –Formulas (e.g., for Coke) –Manufacturing methods –Software programs –Business plans –Customer lists –Pricing information Enforcement –Misappropriation –Damages, injunction 51

Trade Secret or Patent Protection? Advantages of Trade Secrets Disadvantages of Trade No set expiration Secrets No examination costs (aside from maintaining confidentiality) No need to show patentability (novel/non-obvious/eligible) Do not protect your invention if – Reverse engineered – Independently invented – Accidentally becomes public Difficult to enforce and license – Must prove technology obtained by improper means (e.g., violation of NDA, breaking and entering) Only patents provide exclusive rights to an 52

IP Strategy: Trade Secret v. Patent One or the other there’s no getting both, and no changing your mind later When filing a patent application, you are required to disclose, but not identify, the “best mode”, i.e., the best way of practicing the invention or the most preferred embodiment Trade secret enables you to keep that best mode secret Nearly always more advantageous to obtain patent protection (which most inventors recognize) 53

Design Patents Protect article's unique design/appearance – Cannot be functional Examples: Ornamental designs of jewelry, furniture, beverage containers Examination by USPTO – Easy application – Must be novel, non-obvious 14 year term 54

Trademark Protection Trademark Rights Right to prevent others from using confusingly similar marks Must be the first to use mark on the particular goods/services in order to have the rights Types of Protection Common law (use-based) limited geographically State registration Federal registration nationwide priority rights 55

Freedom to Operate 56

FTO Searching What? a search to identify issued patents with claims that appear to cover one or more aspects of a contemplated product Why? can then design around to avoid paying a license fee – Investors want to see freedom-to-operate When? when specific marketed product identified, but may need to accelerate if investors are asking, or you’re in a competitive area with a lot of patents Cost? 5-15k depending on scope, technology and number of patents resulting from search 57

Establishing Freedom-to-Operate Expired patent If a patent is identified as creating an FTO issue, but expires before your contemplated product launch, then not a barrier – The subject matter of an expired patent is in the public domain and free to be practiced by anyone assuming there isn’t another continuation/divisional on file Innovate! developing your own innovations and IP allows you to move away from dominating patents License not ideal, but sometimes obtaining a license at a reasonable cost can be worthwhile 58

Landscape Searching A search to identify what the patent landscape looks like in a particular space – Also useful to keep track of competitors Useful when considering entering a busy space as it helps identify areas to avoid, such as those that would create a FTO issue, and possibly areas that are less crowded Costly because the search terms are typically broad, and involves very open-ended searching Best to consider when closer to market entry 59

FTO v. Patentability/Validity FTO does not mean you are entitled to a patent – FTO novelty of your claims – FTO non-obviousness of your claims Granting of a patent does not mean you have FTO – Granted patent others don’t have a patent that can block you – Generic patent claims v. narrow/specific claims 60

Preparing Your IP for Investors 61

Preparing Your IP for Investors Investors: "Will the IP help us win this bet?" Investors seek to assess the extent to which a company’s IP and its IP strategy will support the goals and objectives of the company – Helps investors confirm that a company is worth an investment and that it justifies the magnitude of the planned investment 62

Make the IP Attract Attention Develop an IP Strategy and link it to the Company Goals Any company worth an investment is always established with welldefined goals and objectives – These goals and objectives drive the conduct of the business and guide most decisions – The goals and objectives should inform the IP strategy as well (and hopefully there is one) Company Goals Company IP 63

Investor Due Diligence The scope of a due diligence will depend on the size of the investment. For significant investments any potential investor will want a great deal of information and documentation. Among the information that will be requested is: The company’s products and it affects patentability intended products The strategy the company pursuing The key prior art in the field and how The relevant third party patents / pending applications to protect its IP The key competitors Any potential barriers to FTO The proposed markets Any agreements the company has with employees and outside The IP portfolio – an itemized list of all patents and pending applications consultants Any technology licensed granted to the company 64

Investor/Acquisition Due Diligence Inventorship, ownership and other rights to the technology Scope of Protection & Enforceability Patentability and Validity Freedom-to-Operate 65

Investors: Ownership Does the person, entity, company own the IP? Alone? Were the correct inventors listed on the patent? Have all inventors assigned rights? Any Inventorship disputes? Do the employment agreements include language assigning rights to the company, and not just a promise to assign? – What about for any consultants? Make sure the assignments refer to the registered company name And that you obtain assignments for each provisional application, as well as the first US non-provisional and any PCT application 66

Investors: Agreements Any issues with past employment agreements of key employees? Relevant license agreements? – Exclusivity for any licensed IP? – Any onerous terms? Are non-employee consultants obligated to assign to the company? 67

Investors: Scope of Protection & Enforceability How broad (or narrow) is the protection provided by the claims? Will it cover the technology and design-arounds? – You’re looking for enforceable scope, not just broad scope – Broad claims may appear to cover more ground, but are more susceptible to attack when enforced How about coverage for actual or potential competitor products? Are there multiple layers of protection with later and later expiration dates? Is the geographic coverage acceptable? 68

Investors: Patentability (pending applications) Will patents be granted? What do the search reports look like? Is there a clear patentability story to overcome prior art? this starts with the initial drafting of the patent application If there are known challenges, is there data to help overcome the issues? 69

Investors: Validity (granted patents) Conduct validity search looking for prior art Are the granted claims novel and non-obvious? Was all prior art known to inventors and those associated with the prosecution of the application submitted to the patent office? 70

Investors: Freedom-to-Operate Has a FTO search been conducted, and what are the results? – Many times these searches have not been conducted A blocking patent is not a deal killer – Can you obtain a license? – Perhaps the claims are overly broad and there’s a reasonable invalidity position that can be established 71

Investor Attorney Performs Due Diligence Investor patent counsel will provide report to investor: – Identifying material issues and weaknesses with any of the DD investigation areas – (Possibly) recommends alternative strategies Report is weighted heavily by investors and used to set valuation Important to have good patent counsel answering questions from investor patent counsel 72

What Can You Do to Prepare Do your own due diligence, such as an internal audit – and do it as early as possible – Help uncover any issues well in advance of the actual due diligence – Company will be able to anticipate the hard questions likely to be raised by the investor team and provide answers that (hopefully) are able to demonstrate that significant issues do not exist – Company demonstrates to its potential investors a high level of sophistication and a commitment to “get it right” Steps can be taken to remedy any IP deficiencies and to mitigate any risk 73

Defending the Due Diligence Anticipate and be able to address the "difficult" issues Rely on legal counsel and use the results of the internal audit Use an internal point person to coordinate the due diligence and communicate with the investor team – Through this person, articulate the company’s business strategy, its goals, and its IP strategy TIP: Package all information – spreadsheets listing all IP, lists of prior art and third party patents – so that it is readily available to investor counsel – Investor team will appreciate readily available copies of patents and applications, prosecution histories, and company agreements 74

Working with Your Patent Attorney 75

Working with Your Patent Attorney Communication: Your patent attorney should understand your level of sophistication and tailor communications accordingly If you receive correspondence you don’t understand, ask questions; you need to understand the attorney’s motivations to provide the necessary information Keep the patent attorney informed of what you’re doing; no one likes surprises – Your patent attorney can help you avoid issues when they know what’s going on 76

Working with Your Patent Attorney Deadlines: The patent process is driven by deadlines, so pay attention to them and give your attorney as much information as possible as far in advance as possible – Your patent attorney should also be providing reminders far enough in advance 77

Working with Your Patent Attorney Cost: Your patent attorney bills by the hour, so give them what they need without substantial delay the more time your attorney spends sending reminders, the bigger your bill, but without the value Ask for a budget for each project so you know what you’re paying for – It’s okay if the budget changes, as sometimes the target changes, but it’s good to have a starting point to keep everyone focused Annual patent budgets can grow rather quickly after about year 3, so ask your patent attorney for an estimated patent budget for the year – There will be several assumptions baked into the patent budget, but it will help you to budget and plan, reducing surprises 78

Working with Your Patent Attorney Example budget e-mail for initial patent portfolio: This is an example of a 15 month budget where a “quick and dirty” provisional is originally filed. Estimate costs at 17k-34k, which is broken down as follows: 1 U.S. Provisional Application 2-4k (“quick and dirty”/coversheet) Convert to Non-provisional: 6-15k (cost to complete the provisional) 1 PCT Application: Strategy counseling: 6-10k 3-5k 79

Working with Your Patent Attorney Example budget e-mail for small patent portfolio: This is the second year of filing applications without any substantive prosecution, so I estimate costs at 21k-31k, which is broken down as follows: 1 PCT conversion: 6-10k 1 new application: 12-16k Strategy counseling: 3-5k 80

Working with Your Patent Attorney Example budget e-mail for a medium-size, growing patent portfolio: This is the second year of substantive prosecution for these cases, so I estimate costs at 82k-95k, which is broken down as follows: 13 Annuity fees at 1k: 13k 7 Prosecution actions at 6k: 2 exam requests at 2k: 42k 4k 1 PCT conversion: 6-10k 1 new application: 12-16k Strategy counseling: 5-10k 81

Marc T. Morley [email protected] 858-314-1563 82