Inventor Boot Camp Thomas Franklin 10 17 2009

©2009 Townsend and Townsend and Crew LLP. All Rights Reserved.

San Francisco | Palo Alto | Walnut Creek | San Diego | Seattle | Denver | Washington, DC | Tokyo | www.townsend.com

Intellectual Property Acquisition, Litigation and Counseling | Technology Transactions | Antitrust and Unfair Competition

Presented by

Thomas Franklin, PartnerElectronics & Software Practice GroupDenver & San Diego Offices

Month Day, 2008

Inventor Boot Camp 2009

October 17, 2009

Townsend and Townsend and Crew LLP2

Presentation Overview

• Introduction to Intellectual Property (IP)• Types of IP

– Trade Secrets– Copyrights– Trademarks– Patents

• Timing Issues for Protecting IP• Patent Strategy Models


Business Value of Intellectual Property

• Economists estimate that two-thirds of the value of large businesses in the US is due to intangible or intellectual property assets*

• The World Bank estimates that, on average, 40% of company valuations are from intellectual property*

• PriceWatershouseCoopers estimated that as much as 90% of the value of the world’s top 2000 enterprises would consist of intellectual property*

• In 1978, IP accounted for 20% of shareholder value, but has grown to 80% in 2007**

*Source: Patent Barista, April 2008**Source: Brookings Institution and Ocean Tomo

80%73%46%20%

1978 1988 1998 2007


Intellectual Capital: Intangible Ideas

Ideas

BusinessMethods

Brands

Software

ProductNames Future

ProductsIdeas

PromotionsBusiness

Relationships

ManufacturingProcesses


Leveraging Intangibles to Create Intellectual Property• Intellectual capital is an intangible asset that must be protected like any other valuable

company asset– As we move away from the industrial age and into the information age, leveraging intellectual capital

is paramount• Trade Secrets, Copyrights, Patents, & Trademarks are the legal tools that convert some

intellectual capital into IP– These legal tools are analogous to security measures to protect tangible assets– Use of these tools prevents further loss of value and converts ideas into property

• A custom IP strategy should be developed to suit:– Type of business– Products– Actions by competitors– Litigiousness of industry– Funding cycle– Size of company– Growth strategy

• High costs require customized solution for your business• More money is lost pursuing the wrong strategy--no matter how inexpensively--than

pursuing the right strategy within the confines of a reasonable budget


Securing Your Intellectual Capital as IP

Copyright

TrademarkTradeSecret

PatentIdeas

Bus inessMethods

Brands

Software

ProductNames Future

ProductsIdeas

Promotions


Types of IP: Trade Secrets

• Definition: Any secret formula, pattern, device, or compilation of information used by the company that gives it an advantage over competitors

• Must not be in the public domain• Company must take steps to protect their trade secrets• No Expiration: Trade secret rights last forever if properly protected• May loose some rights to a trade secret if someone else patents it• Action: Trade Secret Program & reminder letters to employees who leave

SECRET

CONFIDENTIALPROPRIETARY


SECRET

CONFIDENTIALPROPRIETARY

Trade Secret Timing Issues

• Definition: Any secret formula, pattern, device, or compilation of information used by the company that gives it an advantage over competitors and is actively protected

• Timing Issues– Must keep secret– Never expire if kept secret– Train new employees to avoid use of trade secrets or IP from prior employer

• Action Items– Employment/Contractor agreements addressing confidentiality of IP– Non-Disclosure agreements with vendors and partners– Identify trade secrets (e.g., “PROPRIETARY”) and take action to protect (e.g.,

computer, e-mail, document control, security)– Consider publication policy that requires review prior to technical journal

publications, participation in standards boards and presentation at technical symposia

– Remind workers of confidentiality in exit interviews


Types of IP: Copyrights

• Definition: Protects works of original artistic expression in tangible form• Software, Written Material, Maskworks, Recordings, Maybe Logos• Non-employees generally own their copyright so must have assignment in

consulting agreement• Prevents: Reproduction, Distribution, Public Performance, Display, and

Derivative Works• Why: Statutory Damages/Attorney Fees/Ability to Sue in Federal Court• Term:

– Individuals: Life+70 yrs.– Companies: Shorter of 95 yrs. from publication or 120 yrs. From creation

• Once Filing Program Set Up, No Attorney Typically Needed• Example Notice: ©ABC Corporation, 2004. All Rights Reserved.• More Info: www.copyright.gov ©


Copyright Timing Issues

• Definition: Protects works of original artistic expression in tangible form (e.g., Software, Written Material, Maskworks, Recordings, Maybe Logos)

• Timing Issues– File Federal Registration prior to release of product– Term: Individuals: Life+70 yrs. Companies: Shorter of 95 yrs. from publication

or 120 yrs. from creation• Action Items

– No longer required to mark with ©, but still recommended– Set-up program to regularly file copyrights– Lock-up rights of non-employees who generally own their copyright so must

have assignment in consulting agreement– Train employees on Open Source issues and use of other third party material– Check all agreements for stealth out-licenses of copyrights– Don’t rely upon “fair use” or other exceptions unless approved by counsel

©


Types of IP: Service Marks and Trademarks

• Definition: Words, symbols, designs, colors & sounds used to identify the source of one’s products or services to consumers

• A mark indicates the source of the product/service• Mark must distinctively identify product/service to avoid

customer confusion• Local rights accrue in the US based upon use• Federal Registration “®” enhances rights and damages• Never expire so long as used• TM for products and SM for services• Similar to trade dress• More Info: www.USPTO.gov

®


Service Mark and Trademark Timing Issues

• Definition: Words, symbols, designs, colors & sounds used to identify the source of one’s products or services to consumers

• Timing Issues– Search once potential mark(s) are chosen as it will only get more difficult to change– Consider Federal Registration prior to use if mark will ultimately be used in interstate

commerce– Choose foreign filings to match product footprint– Use not required prior to filing, but use should be expected in the next 4 years or so to

avoid abandonment of your issued registration for failure to show use– Trademark rights never expire so long as used continuously

• Action Items– Encourage clients to pick several possible names to chose from after search results

indicate those cheapest to adopt– Properly label marks with “TM” or “®” to enhances rights and damages– Set-up marking guidelines that the organization follows to avoid self-inflicted damage to

marks– Watch for and remedy any infringement/dilution/genericide of mark

®


Types of IP: Patents

• Definition: Confers the inventor the right to exclude others from making, using, manufacturing, importing the invention

• A patent does not give you the right to practice your invention, just the right to exclude others from practicing your invention

• Protects Invention for 20 years from filing• “Anything under the sun made by man”—Supreme Court

– Software, Business Methods, Genes, Man-made Organisms• Exchange Government Monopoly for Full Disclosure of Invention• Doesn’t require infringer to be exposed to idea like trade secrets or

copyrights• Invention must be novel and non-obvious• Cannot be publicly known or offered for sale (one year grace period in US)• Inventor-based system in US so must get assignment from inventor• More Info: www.USPTO.gov


Patent Timing Issues

• Definition: Confers the inventor the right to exclude others from making, using, manufacturing, importing the invention

• Timing Issues– Protects invention for 20 years from filing– Patent rights go to the first to invent, not the first to file– Cannot be publicly known before filing to preserve foreign rights– Cannot be publicly known or offered for sale more than one year before filing to preserve US rights

• Action Items– Consider way to capture your technical staff inventing first such as an inventor notebook program– Assess patent landscape when entering a new area with different competitors– Consider freedom to operate clearance study prior to investment in a specific product, and work

through any design arounds to avoid redesign– Monitor design reviews, trade show plans, proposed technical papers, or any other investment in

product development for ideas suitable for patenting– Consider patent committee to champion filings and patent reward program to incentivize inventors– File patents on improvements to keep products always covered by patents– Confirm proper marking of products to not patent pending or issued patents


Move Into New Product Area

BeginConsiderPatents

Scientists/Engineers Begin Design

PatentLandscape Study

InventProduct/Service

ProductClearance Study

Repeat

Product Name(s)Chosen

Domain Purchase(s)

Public MarketingBegins

File Patents Prior to Disclosure

Trademark Search(es)

Design Finalized

File Patents on Improvements

File Copyrights on Code & Literature

File Trademark Application(s)

$Product

ImprovedProduct

Sold

File More Patents on Details from Design

Police IP Infringement

Consider Copyright Filing on Derivative

$$

Interact withVendors/Partners

Non-DisclosureAgreements

©

®


Market Driven Approach to IP

• Analyze product and future products to determine what differentiates your product in the market place– E.g., “Cleans stains 20% better”, “10% faster”– Focus IP on those innovations that give market advantage

• Determine reasonable budget and IP tools to utilize• Judiciously pick the best ideas from both the technical

perspective and the marketing perspective• Feedback: Accentuate those ideas that have IP protection in

your marketing• Constantly re-evaluate expenses and abandon IP that is less

strategic


Common Patent Strategy Models

• Strategic models can generally placed in a few general model– Research Labs without products– Small Companies– Large Companies– Pure IP Play– Drug Companies– Individual Inventor

• Understanding your model and your competitors is crucial to any patent program


Patent Strategies: University and Government Labs

• Promote dissemination of academic research to industry through out-licensing

• Focus IP tools on most promising technologies to preserve limited budgets

• Choose licensee companies most likely to commercialize product to drive royalties– Licensee milestones are common to assure

commercialization• Incentives to scientists that promote profession• Strong desire to avoid liability


Patent Strategies: Small Companies / Start-ups

• Funding is usually tight so patent strategy must be focused, but not ignored

• May in-license technology to get a competitive advantage• Small companies are “under the radar” of large companies for

some time period so take advantage of that• A stable of patents must be developed before a large

company tries to crush them (success = on radar)• The quality of the patents is more important than the

quantity (warrants searching and careful participation)• Foreign filing may be started in the hope that funding will

soon follow to pay for the large expenses that soon follow


Patent Strategies: Large Companies

• Large companies want to protect their markets with large portfolios of patents

• Defend any lawsuit by finding their own patents to assert• Cross licenses done with competitors with their own large portfolios• The more patents the better to bury your competitors in litigation and the

associated legal fees• Sue small competitors and/or acquire them

– Smaller companies often cannot afford the legal costs of litigation• A modern trend is to seek out-licensing to capitalize the patents

– May try licensing competitors without patent portfolios or non-competing companies

• Can afford foreign filing of patents


Patent Strategies: Pure IP Play

• Some companies/individuals never pursue a product related to their patent(s)– E.g., MIPS, Rambus, closet inventor

• Shield is no defense because nothing to retaliate against• Licensing is pursued by building a war chest from the early

licensees to use against the more reluctant licensees• Closet inventors are rarely taken seriously because of the

litigation costs prevent enforcement of their patent(s)• Extremely risky strategy as one unfavorable patent litigation

ruling can decimate the market cap of the pure IP play• Established companies refer to these licensing organizations

as “Patent Trolls”


Patent Strategies: Drug Companies

• Some companies never pursue a product related to their patent(s)– E.g., Bio companies– Out-license their compound to drug makers– Defensive portfolio is no deterrence because the patent holder has no product

to retaliate against• Only a few patents cover a particular drug, but those patents are

extremely important to ward off generics• Difficult to protect tools that find drugs• Portfolio approach (i.e., minefield) less effective due to sparse patent

thicket makes avoiding other’s patents easy• Unlikely your drug will infringe other’s patents

– Consider freedom-to-operate opinion to assess the patent litigation risk• Aggressive foreign filing of patents


Patent Strategies: Individual Inventor

• Usually plans to obtain a patent without commercializing• Odds of success without commercialization are very low

– Only 2% of patents ever make money according to the Patent Office– Litigation very expensive– Companies are usually unwilling to license without a credible threat of

litigation• Success is so rare today for individuals that it is a newsworthy

event when it happens• Gather war chest with cheap licenses to afford litigating the

more difficult licenses– Reputable firms willing to take patent cases on contingency are a

rarity


Thomas Franklin, [email protected]

Tom Franklin is a partner in Townsend’s Denver and San Diego offices. His practice focuses on patent and trademark prosecution, licensing and strategic counseling for high tech companies in the electronic, software and business method fields.Mr. Franklin received his J.D. from University of San Diego in 1997 and a B.S. in Electrical and Computer Engineering from San Diego State University in 1990, summa cum laude. He is admitted to the State Bar of Colorado and practice as a patent attorney with U.S. Patent and Trademark Office.Prior to entering the field of law, Mr. Franklin spent eight years working in semiconductor fabrication facilities at the Naval Ocean Systems Center and Hughes Aircraft and several more as a senior engineer for Lockheed Martin developing digital designs for cryptographic data links.

Practice AreaElectronics & Software

Denver Office1200 Seventeenth Street

Suite 2700Denver, CO 80202

tel 303.571.4000fax 303.571.4321

San Diego Office12730 High Bluff Drive

Suite 400San Diego, CA 92130

tel: 858.350.6100fax: 858.350.6111


Firm Profilewww.townsend.com

– Townsend is among the largest firms specializing in patents, trademarks, and copyrights in the United States. As a full-service IP firm, we have the legal and technical expertise to handle every IP need. Most of our attorneys have technical degrees to complement their legal education, and many have advanced degrees and/or industry experience.

– Townsend has a 150 year history in focused on IP alone.– The firm has 210 lawyers that all practice in the IP area. – Offices in Denver, Palo Alto, San Diego, San Francisco,

Seattle, Tokyo, Washington DC, and Walnut Creek.


Web Resources

• Patent and Trademark Offices– Searchable databases of patents, publications, and

trade/service marks– US: http://www.uspto.gov– Europe: http://ep.espacenet.com– Japan: http://www.jpo.go.jp

• US Copyright Office– http://www.copyright.gov

• Townsend and Townsend and Crew– http://www.townsend.com