Licensing Boot Camp: Intellectual Property & the Business ... · © 2014 Foley Hoag LLP. All...

Licensing Boot Camp: Intellectual Property & the Business of Biotech

Hemmie Chang Chair, Licensing & Strategic

Alliances Group, Foley Hoag LLP March 25, 2014

Licensing Volume Outpaces M&A

Who Owns the Invention?

An inventor owns his or her invention –Co-inventors jointly own the

entire invention Who is an inventor?

–First to file for patent, unless derived from another

So why don’t grad students own their patents? –Assignment is typical condition

of employment/use of facilities

Assignment of Patent Rights

Patent Rights Typically Assigned to Employer, University, or Government Agency Up Front

Assignment of Patent Rights

Harvard IP Policy (cont.)

When does the institution own its employees’ work? –Employment agreement saying “does hereby assign”

created an automatic assignment. Preston v. Marathon Oil (Fed. Cir. 2012)

–Agreement saying “agree to assign” did not, so later transfer by employee took precedence. Stanford v. Roche (Fed. Cir. 2009), aff’d other grounds (U.S. 2011)

Note in ex-US academic institutions inventions not typically assigned to institution in writing

IP Ownership

University Technology Transfer Offices

Total Invention Disclosures

U.Cal. 1,776 MIT 694 Harvard 368

Startup Companies

61 (3.4/100 discl.)

16 (2.3/100 discl.)

10 (2.7/100 discl.)

1. For MIT Startups, Venture Capital financed or $500K minimum funding.

FY12 Technology Transfer Activity

National Institute of Health funding (Awards by Location, FY 2011)

Cluster

$ (in millions)

Greater Boston $2,274.9 1

New Jersey/New York City $1,649.6 2

San Francisco Bay Area $1,366.4 3

Los Angeles/Orange County $1,045.2 4

Suburban Maryland/DC/Arlington $ 965.6 5

Raleigh-Durham $ 916.7 6

Seattle $ 885.3 7

San Diego $ 871.7 8

Source: ©Jones Lang LaSalle IP, Inc. Life Sciences Cluster Report Global 2012

What is a License?

Common IP license types –Patent license –Unpatented technology (trade

secret) license –Copyright license –Software license –Trademark license –Any combination of the above

Highly variable and specific to the situation

License Agreement or Option

License Agreement provides licensee access to another party’s technology –Can be exclusive –Can be non-exclusive If parties cannot get to yes on

License Agreement, Option Agreement can be an initial step for monetizing IP

License vs. Assignment (Sale)

License is different from outright sale or assignment of patents and trademarks –Rights retained by owner –Ability to control: e.g., field, territory, term, products, sale channels, use

–Choose exclusive or limited rights –Control who else can use the rights –Rights can revert upon termination –Can license multiple times

Reservation of Rights

- NOTE that academic institutions and non-profits may be required to reserve rights for academic, non-profit or governmental purposes (e.g. Bayh-Dole restrictions)

- Companies may also want to explicitly carve out uses, products, fields or territories for themselves or third parties (e.g. internal research)

Co-Development & Marketing/Distribution

One party may fund development by the other –Incentives created by up-front funding, milestone payments, supply arrangement, and/or royalties.

If smaller party has technology close to commercialization, enter partnership for marketing and distribution

Recipe for a License

What are your business goals? What is the technology? What rights are to be created,

transferred or licensed? How will the licensed technology be

used, developed, supplied, or sold? What’s the financial deal? How can you get out of the agreement? What is the big thing that can go

wrong?

Key License Terms

License grant –Patent rights (35 USC 271, 35 USC 262) –Make, have made, use, sell, offer to sell, or import –Covenant not to sue

Term, e.g., life of patent, time-limited Licensee (affiliates, subcontractors, collaborators)

License scope –Exclusive; co-exclusive; non-exclusive –Field, e.g., indication, product, consumer vs. doctor –Territory, e.g., US, ex-US, worldwide, Japan, ROW

Show Me the Money

Upfront Fees Milestones Royalties

Key License Terms

Consideration –Upfront; milestones (development, annual sales, per

product, one-time or aggregate) –Royalty rate (for patents, step-down for know-how,

anti-stacking); lump sum; minimum payments •Brulotte v. Thys (U.S. Supreme Court)

–Royalty base (e.g., net sales, which products) –Sublicense income –Recordkeeping and audit rights

Can Licensee challenge licensed patent? –Medimmune; Rates Technology

IP Ownership

Background IP - Each party may bring IP to the table - Often this is the crown jewel of the

company - Prior to entering into any collaboration,

company should get their IP in order - Critical to clearly demarcate the buckets of

IP each party owns

IP Ownership

Improvements or Foreground IP Ownership may be determined based on: - Field: Licensee owns all improvements in the

licensed field - Contribution: Each party owns all

improvements it solely develops, and improvements developed together can be owned by one or both parties (joint IP)

Key License Terms

Control over IP: prosecution, infringement, and enforcement Limits on publication; Confidentiality Restrictions on further transfer

–Sublicense (one-tier or multiple tiers) –Assignment

•To acquiror by merger or sale of all or substantially all assets “to which this license relates”

Liability and Indemnification Termination

Hemmie Chang, Chair Licensing & Strategic Alliances Group 617 832 1175 hchang@foleyhoag.com Dana Gordon, Deputy Chair Intellectual Property Group 617 832 1765 dgordon@foleyhoag.com Foley Hoag LLP 155 Seaport Blvd. Boston, MA 02210

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Licensing Boot Camp: Intellectual Property & the Business ... · © 2014 Foley Hoag LLP. All...

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