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Presenting a live 90-minute webinar with interactive Q&A

IP Ownership, Use and Protection Provisions

in Commercial Contracts: Drafting

and Litigation Complexities Evaluating When and How to Use IP Clauses in Business Agreements,

Avoiding or Responding to Litigation Involving IP Provisions

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, AUGUST 16, 2017

Jennifer C. Bailey, Partner, Erise IP, Overland Park, Kan.

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© 2017 Erise IP, P.A.

IP Ownership, Use and Protection

Provisions in Commercial Contracts:

Drafting and Litigation Complexities

August 16, 2017

Jennifer Bailey

Erise IP, P.A.

6201 College Blvd.

Overland Park, KS 66211

Jennifer.Bailey@eriseip.com

Strafford Webinars

Overview

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• Ownership of IP

• Core Business Agreements

• Litigation Concerns

Ownership of IP

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• Patents

– Common business issue: Employees who develop inventions within scope of employment

– There is no state or federal statute that conveys ownership of the employee’s inventive rights to the employer

– The employer must rely on the common law “shop right” doctrine

• Beriont v. GTE Labs., Inc., 535 F. App'x 919, 923-24 (Fed. Cir. 2013).

– To avoid relying on the shop right doctrine, the employer must have a written assignment of the employee’s invention rights

• Joint Ownership of Invention: A company usually does not want to jointly own patents

Ownership of IP

8 © 2017 Erise IP, P.A.

• Copyrights

– Copyright law is counterintuitive to what you think the law should be

– “Work for hire” is a misnomer and commonly used incorrectly

– A work for hire situation arises in the employer/employee relationship and not the company/independent contractor relationship

– Unless work for hire, the company must have a written assignment of copyright

Common Business Agreements

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• Employment Agreements

• Supplier Agreements

• Distributor Agreements

• License Agreements

• Development Agreements

• Master Services Agreements

• Software Development Agreements

• Customer Agreements

• Confidentiality Agreements

Four Agreements Every Business Should Consider

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• Employment Agreement

• [Vendor/Supplier/Contractor/Consultant] Agreement

• Copyright Assignment

• Software Development Agreement

Employment Agreements

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• Employment Agreement should be used with any employee involved with creating works of authorship or inventions

– Marketing personnel

– R&D personnel

– Graphic artists

– C-Level executives

• The EA needs to include an assignment of all intellectual property developed, created, or authored within the scope of employment

Employment Agreements

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Example Language: Disclosure and Assignment of Intellectual Property.

Disclosure of Developments: Commencing on the date written above and continuing during Employee’s employment with ______, Employee agrees to promptly inform _____ of the full details of all inventions, discoveries, improvements, innovations, and ideas (collectively “Developments”), whether or not patentable, copyrightable, or otherwise protectable, and of which Employee conceives, completes, or reduces to practice (whether jointly or with others) and that:

(a) relates to ____’s present or prospective business, or actual or demonstrably anticipated research and development;

(b) results from or is suggested by any work performed by Employee for ______; or

(c) results from any activities Employee performs using any equipment, supplies, facilities, materials, trade secrets, or personnel of _____.

Assignment of Developments: Employee shall assign and does hereby assign to ______ or ______’s designee Employee’s entire right, title, and interest in all of the following conceived or made by Employee (whether alone or with others) while employed by _______:

(a)all Developments; (b) all copyrights, trade secrets, trademarks, and mask work rights in Developments; and

(c)all patent applications filed and patents granted on any Developments, including those in foreign countries.

Employee agrees to execute, with no additional remuneration, all documents or perform any other required action for effectuating the Assignment of Developments set forth in this Section.

Notice Required By Statute: Employee acknowledges that this Agreement does not apply to any invention that qualifies fully under the provisions of Kansas Statutes Annotated Sections 44-130(a) and (b), the text of which is attached as Exhibit A. This section shall serve as written notice to Employee as required by Kansas Statutes Annotated Section 44-130(c).

Employment Agreements

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• Some states, including Kansas, require specific language in an Employment Agreement. See, K.S.A. 44-130

Employment agreements assigning employee rights in inventions to employer; restrictions; certain provisions void; notice and disclosure.

(a) Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless:

(1) The invention relates to the business of the employer or to the employer's actual or demonstrably anticipated research or development; or

(2) the invention results from any work performed by the employee for the employer.(

(b) Any provision in an employment agreement which purports to apply to an invention which it is prohibited from applying to under subsection (a), is to that extent against the public policy of this state and is to that extent void and unenforceable. No employer shall require a provision made void and unenforceable by this section as a condition of employment or continuing employment.

(c) If an employment agreement contains a provision requiring the employee to assign any of the employee's rights in any invention to the employer, the employer shall provide, at the time the agreement is made, a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless:

(1) The invention relates directly to the business of the employer or to the employer's actual or demonstrably anticipated research or development; or

(2) the invention results from any work performed by the employee for the employer.

(d) Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention.

Vendor Agreements

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• A [Vendor/Supplier/Contractor/Consultant] Agreement that includes several key provisions but that is easy to review, short, and reusable with new vendors

• Confidentiality provision

– May want mutual confidentiality

• Non-Use provision (include in confidentiality)

• Assignment of IP rights

• Optional: Non-compete

Copyright Assignment

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• A Copyright Assignment is short, easy to use, and reusable

• Insures copyrightable material (not inventions) is assigned to the company

– Photographers

– Anyone who authors text or software

– Graphic artists

– Manufacturers

– Members of an LLC

• SDAs are a necessity if your client is having software developed, e.g., a mobile app, a website, etc.

• SDA will include the following:

– Assignment of IP rights, including assignment of source code specifically authored for the client

– Non-exclusive, perpetual, and royalty-free license for source code the developer wants to own

– Provision for open source code

– Provision for third-party developers

– Covenants and warranties

– Deliverables

– Non-Compete and interference 16 © 2017 Erise IP, P.A.

Software Development Agreements

• Supplier Agreements can be similar to generic Vendor Agreement but preferably include more

– Indemnification Provision

– Quality, supply, and support of product

– Terms of sale

– What happens if supplier stops supplying

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Supplier Agreements

• Indemnification can vary greatly

– Limited to original purchaser?

– Include subsequent purchasers?

– Apply when licensed product/service is combined? • This can extend liability to acts solely performed by others

– Include a predetermined method for invoking indemnification and the amount/percentage of indemnification?

– Exclude certain uses of the product or service may be an infringement?

• Conflicts: Important to retain independent counsel

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Indemnification Provisions

• Can I really get sued? Absolutely. – Business agreements and good practices help put your company in the best

position

– Patent infringement suits are also a possibility

• What companies are most at risk for patent infringement actions? – Conducting ecommerce/ web transactions?

– Have Smartphone or tablet apps?

– Software based product/ application?

• Can business agreements protect companies from litigation threats?

– Some but not all threats

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Litigation Concerns

• Who are the players?

– Patent Assertion Entities

• 800 active patent assertion entities

• Collect about 12 billion dollars annually

– Businesses that practice patented inventions

– Business that do not practice patented inventions

• Where are patent lawsuits filed?

– Everywhere.

– Hotspots - Eastern District of Texas, Delaware, Northern District of Illinois, Northern and Central Districts of California

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Understanding the Patent Litigation Landscape

• Indemnification language shifting litigation risk

• Know who you are doing business with

• Anticipate breakdowns with vendors, suppliers, employees, and others and put safeguards in place to ensure you can still “do business”

• Share costs and resources to tackle problematic patents

• NPE insurance? – Know who you are dealing with and read the fine print

• Sign up with a defensive patent pool – Buyer beware!

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Protections from Patent & Business Litigation

• Investigate the asserted patent and claims of infringement

• Consider settlement- potential damages/legal fees

– Avoid the technology

– Joint representation to reduce legal fees

– Flat or monthly fee contract

• Proceed in district court with strategy focusing on a few key issues

• Seek Patent Office review

– IPR

– CBM

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A patent lawsuit is filed, what next?

• Venue/Forum – New rules for US entities

• Software Patents

• Attorney Fee Award

• Post-Grant Options

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