Intellectual Property Basics and Sticking Points for Negotiating Research Agreements BethLynn...

Intellectual Property Basics and Sticking Points for Negotiating Research

Agreements

BethLynn Maxwell, Ph.D., J.D.The University of Texas System

Office of General CounselPresentation to UT – San Antonio

October 26, 2006

UT - San Antonio Presentation - October 26, 2006 - San Antonio, TX

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Discussion Points Patent Law Primer Four Major Areas in Research

Contracts Intellectual Property

Troublesome Clauses in Research Contracts Confidentiality Publication Indemnification


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Patent Law Primer


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Types of Intellectual Property

Trademarks ~ identifies source of goods or services

Copyrights ~ protect works fixed in a medium

Trade Secrets ~ best where the subject matter can’t be easily “reverse engineered”

Patents ~ 3 kinds: design, plant and utility


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The United States Patent System

Government sponsored “monopoly”; limited by time and geography

Does not convey affirmative right – only the right to exclude others

Article I of the Constitution provides the legal foundation

Administered by the Commerce Department through the U.S. PTO


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Requirements for Securing a Patent in U.S.

Statutory Subject Matter ~ category Novelty ~ new, first to invent Utility ~ specific, substantial, credible use Not obvious ~ person of ordinary skill in

the art Written Description ~ clear and concise

terms Enablement ~ enable others to make and

use Best Mode ~ to carry out invention


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What is Patentable Subject Matter ? 35 U.S.C. § 101

Novel Subject Matter – new, not made or done before What is the invention? A

process, machine, manufacture, composition or improvement?

Cannot claim products of nature, physical & chemical principles


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Utility ~ Usefulness of an Invention Specific utility

Is the utility specific for the claimed invention?

Credible utility Is that specific utility credible?

Substantial utility Does the utility have real world

value?


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Specific Utility

The utility has to be specific to the subject matter claimed.

Contrast this to a general utility

that would apply to the general class of invention.


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Credible Utility Standard is whether a person of

ordinary skill in the art would accept that the disclosed invention is currently available for such use Perpetual motion machines But, some nucleic acids might be

used as probes, chromosome markers, or forensic or diagnostic markers


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Substantial Utility “Real world” use

Must not require further research to identify or confirm a real world context

Throw away utilities are not substantial uses unless nature of invention is specifically directed to such uses


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Invention Can Not Be Anticipated (35 U.S.C. § 102)

Not anticipated by the prior art Applicant shall be entitled to a patent unless 1 of

the 6 conditions creates a time bar or if the applicant is not an inventor.

Each and every element of the claimed invention must not be disclosed in a prior art reference.

Objective standard of someone skilled in the art of the invention


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Invention Can Not Be Obvious ~ 35 U.S.C. §

103

An invention is not patentable if the subject matter of the patent claims, as a whole, would have been obvious at the time the invention was made to a person having ordinary skill in the art to which the claimed subject matter pertains.


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Factors to Consider For Non-Obviousness

1 – Educational level of the inventor; and 2 - Type of problems encountered in the art;

and 3 - Any prior art solutions to those problems;

and 4 - Rapidity with which innovations are made;

and 5 - Sophistication of the technology; and 6 - Educational level of the workers active in

the field


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Enablement Requirements~

Teach How to Make and Use

Written Description ~ full, clear, concise and exact terms

Enablement ~ Must enable others to make and use the invention without undue experimentation

Best Mode ~ Must present best way to carry out the invention


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Non-Infringement Patent Disputes

Inventorship disputes – defining inventorship is difficult

Interferences – who was the first to invent

Ownership – research agreements, MTA’s

Most turn on who did what and when


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One Final Point ~Patenting Strategies

Develop a Patent Claim Drafting Strategy Select Type(s) of Claims Prioritize Goals for Maximum Protection Include Licensing Safeguards Analyze Potential Revenue Flow ~ Carefully

Define Field of Use Analyze Target Infringers Address all Statutory Hurdles


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The Big PictureSynergies exist and great value can be created

Research Inst.

Biotech

Big Pharma

Hypothesis& Theory

Discovery &Early Dev.

Late Dev. &Commercialization


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The Big PicturePerspectives

Taxpayers Government

Early Investors/VC Founders

Institutional Investors Board of Directors

Prestige Newsworthiness Sustainable Growth

Top Faculty National Ranking

Survival Validate the Study

Meet Projections Strengthen Pipeline

ResearchInstitution Biotech Pharma

Stake-holders

Concerns

Goals

Objectives Endowment Research Grants

IPO/Market Cap Rapid Growth

Increase R&D Productivity


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The Big PictureCultures

ResearchInstitution Biotech Pharma

Ivory towers Tenure Publish or perish

Hype Heroic founders IPO

Blockbusters Bureaucracy Slave to the street

Expansion ofknowledge

Expansion ofmarket cap

Expansion ofprofits

Real Life

Values

Assumptions Risk is removed Speed is

subordinate

Risk is embraced Speed is life

Risk is mitigated Speed is important


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Understanding Who You Are Negotiating With

Critical Deal Topics

Imp

ort

an

ce

Publication Rights Confidentiality IP Indemnification

Research Institution Biotech Pharma


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Typical Points of Contention –

Critical Deal Topics

Intellectual Property Publication Confidentiality Indemnification


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Intellectual Property

Concerns IP Ownership and Inventorship

All 3 Entities Agree: Inventorship follows U.S. Patent Law

Rule: Creator owns data/IP Exception: Clinical Trial Agreement

Ownership follows inventorship


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How is Inventorship Determined?

Definition According to US Patent Law Different from authorship

Why can’t UTSA decide in advance who the inventor will be for IP resulting from the research


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Intellectual Property

Should be Treated Same for All Agreements Sponsored Research Agreement Material Transfer Agreement Clinical Trial Agreement


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Ideal IP Clause for All Agreements

What you invent is yours What I invent is mine What we jointly invent is jointly

owned Inventorship follows US patent law Ownership follows inventorship $$$ does NOT equal ownership


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Why Can’t UTSA Give Unknown IP Away To Sponsor Before It Is

Created? Who owns the IP once it is created?

Board of Regents of The UT System Use of State of Texas resources,

personnel and equipment Adequate compensation for IP

How can that be determined if you don’t know what the IP is?


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Troublesome IP Clauses

Non-Exclusive Royalty-Free License Internal research only - Good To make, use, and sell, and

sublicensable - Bad Sponsor Wants to Own Our IP

Not just a license Background Intellectual Property Right of First Refusal


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Non-Exclusive, Royalty-Free, License in SRAs

Internal, Research Purposes Only Acceptable; AOK; conforming Non-transferable Make sure NERF comes with option to

nego royalty-bearing, sublicensable exclusive license to make, use and sell

Try to limit all NERF licenses to internal use only – avoid any language that gives Sponsor right to commercialize our inventions for free


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Non-Exclusive, Royalty-Free, License in SRAs

Sublicensable & Right to Make, Use, & Sell Non-conforming; LOUSY Try to negotiate this clause out Or, reduce to NERF license for internal

purposes only and link to royalty-bearing exclusive license

Non-exclusive means no exclusive licenses are offered to anyone else – only non-excl

What if Sponsor won’t budge? Form G


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Sublicensable NERFs in SRAs

This agreement allows Sponsor a world-wide, perpetual, royalty-free, fully paid-up, non-exclusive license, sublicensable to anyone, to make, use and sell any Invention created under the agreement

Form G


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What if Sponsor Wants to Own Our IP?

Not Okay in Sponsored Research Ag $$ does not equal ownership We should own what we invent Grant royalty-bearing license, make, use,

or sell Grant NERF license for internal purposes

only Okay in Limited Instances

Sponsor Initiated Clinical Trial Agreement Why is it okay here and not elsewhere??? Not Okay in PI initiated CTAs. Why?


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Clinical Trial Agreements

Sponsor Initiated CTA Okay for Sponsor to own IP – Why?

Principal Investigator Initiated CTA Institution should own IP Sponsor will usually insist on owning

our IP Jointly Initiated CTA

Both Institution and Sponsor should own IP


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Background IP What is it?

Stuff you own going into an Agreement Why would Sponsor want it? What should you do?

Don’t agree to BIP OR – narrowly define it to one piece of IP

Problems with Background IP Scope Identify it Limit it to one PI Control it

Compare to Foreground IP


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Right of First Refusal What is it?

Gives the holder the right to meet any other offer before the proposed contract is accepted.

When Sponsor has a NERF license and does not exercise its option to negotiate an exclusive, royalty-bearing license

AND, reserves a right of first refusal What Does it Mean?

If you negotiate an exclusive, royalty-bearing license with another company, before you sign contract, you have to offer that deal to Sponsor.


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Summary ~ Avoid Pitfalls

When negotiating IP, avoid troublesome clauses NERF licenses to make, use and sell Sublicensable Ownership of IP Background IP Right of First Refusal How Can an Agreement get Approved if

it has Non-Conforming Clauses in it?


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What Is A “Form G” Agreement?

Form G = Non-Conforming Agreement re: IP, publication, indemnification provisions

Weigh Benefits Against Risks Identify Non-Conforming Provisions in

Agreement Do Benefits Outweigh Giving IP Away? Administrative Approval/Procedural

Process at UTSA Form G’s are not discouraged at UT

System


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Form G Process at UTSA Form G’s are Not Discouraged

Important Administrative Authority Negotiate Agreement

Can’t negotiate out non-conforming provisions

Identify Deviations from RRR Negotiator Transmits Form G to UTSA

President or Delagatee What’s in a Form G Transmittal Letter?


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Publication Concerns

When Can We Publish?

What Can We Publish?

Pre-Publication Review Process

What is a Reasonable Delay? How to Monitor Faculty’s Enthusiasm

Real World Remedies & Deal Breakers


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When/How Can We Publish?

Research Institutions – Non-Negotiable

Preserve Institution/Principal Investigator’s absolute right to publish

Sponsor cannot “control” our publication rights or “approve” contents of publication

Cross reference right to publish in confidentiality and ownership of data §§

Principal Investigator owns the copyright in his/her publications


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When Can We Publish?Research Institutions -

Negotiable Review periods

Must be reasonable Balance publish or perish Length of review period

30 - 60 days for manuscripts and 15 for abstracts – longer times discussed with and initialed by PI

Delay publication to protect intellectual property Must be reasonable delay and must be specified Average ~ 60 – 90 additional days for filing

Multi-site/center clinical trial studies Preserve Institution/PI’s right to publish separate

from multi-site joint publication after reasonable delay

Reasonable delays permitted until joint publication is published OR 12 – 18 months after our study is over (whichever is shorter)


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What Can We Publish?Research Institutions

We must have an unrestricted right to publish We want to publish everything

Publish or perish – educate faculty Balance between publishing all versus publishing

enough data to support conclusions If data and results are made confidential:

Delete section that makes data/results confidential Preserve absolute right to publish info that

supports conclusions Problems with young data (not raw data)

Company/Sponsor wants to delay publishing until data is matured (or is it now stale?). Data is not like fine wine.


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How to Monitor Faculty’s Enthusiasm

Research Institutions

Once it is out of the bag …

Educate, educate, educate Stress importance of “no headlines” Emphasize their reputation is at

stake Administrative oversight


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Real World Deal Breakers ~ Publication

Company/Sponsor cannot restrict or control our right to publish

Deal will go “south” if Sponsor: Demands to “approve” manuscript/abstract Insists on unreasonable delay for review before

publishing Insists on unreasonable delay for filing patent

application Refuses to cross reference our publication rights in

confidentiality § and § where Sponsor “owns” data Rarely a deal breaker – but they do exist

Our needs are statutorily driven and are fair


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Ideal Publication Clause ~

Research Institution’s Perspective

“Institution shall have the right to publish or disclose all results of the research. To the extent that Company /Sponsor confidential information is needed to support the publication, Institution shall have the right to include such confidential information in the publication or disclosure.”


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Ideal Publication Clause ~

Industry’s Perspective

“Institution shall not publish or disclose any results of the research.”


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Publication Clause ~ Reality

1.1 Review by COMPANY of Publications Related to Program Technology. Subject to the rights granted to Company under this Agreement, Principal Investigator will have the right to publish or publicly disclose all technical reports, Program Materials, Program Technology. Subject to the terms set forth in Sections 8.2 and 8.3 below, in order to avoid loss of Program Patent Rights as a result of premature public disclosure of patentable information, Principal Investigator and Institution will provide to Company, at least sixty (60) days prior to submission for publication or public disclosure, any and all presentations, manuscripts and abstracts intended for publication or public disclosure containing any technical reports submitted to Company pursuant to Section 5.2, Program Materials or Program Technology (in each instance, “Institution Disclosure” or “Institution Disclosures”). Company will have the right, but not the obligation, to waive all or any portion of the review period described above. Company will review portions of the proposed Institution Disclosure which Principal Investigator intends as a final draft to be submitted for publication or public disclosure, as the Principal Investigator makes such portions available, in a manner comparable to its review of a final version for public disclosure; provided, however, the experiments and results described therein are not materially or substantially modified in the final version of Institution Disclosure. Any such portions which are materially or substantially modified will be submitted to Company for review in accordance with this Section 8.1. Principal Investigator agrees to include in any publication or public disclosure of the results of the Research Program an appropriate acknowledgement of Company’s sponsorship of the Research Program. Authorship of any publication disclosing such results shall be determined in accordance with scientific custom.

1.2. Protection of Information to be Disclosed in Publications. During the course of the sixty (60) day review period set forth above, Company will notify Principal Investigator and Institution whether Company desires to file a patent application pursuant to Section 9.3(b) or desires Institution to file a patent application pursuant to Section 9.3(a) on any Invention disclosed in the Institution Disclosure. Subject to the terms set forth in Section 8.3, in the event Company desires that such a patent application be filed, Principal Investigator and Institution will delay publication or disclosure of such Institution Disclosure until the occurrence of the first of the following: (a) filing of a patent application covering such Invention, (b) agreement by Company and Principal Investigator and Institution that no Invention is disclosed in such materials, or (c) ninety (90) days after the date that such Institution Disclosure was received by Company from Principal Investigator and Institution. Further, subject to the terms of Section 8.3, if Company reports to Institution or Principal Investigator that such Institution Disclosure contains Company Confidential Information, Principal Investigator and Institution will remove such Company Confidential Information from such Institution Disclosure, except for Company Confidential Information which (i) the Principal Investigator deems is reasonably necessary to support the results which are described in such Institution Disclosure and (ii) is either sequence information of a transporter molecule provided by Company to the Principal Investigator for use in the Research Program for which an Identified Key exists or tissue distribution information disclosed by Company to the Principal Investigator under this Agreement

1.3. Institution Disclosure Including Identified Key. In addition to the rights and processes set forth in Sections 8.1 and 8.2 concerning Company’s right to review any proposed Institution Disclosures, and Principal Investigator’s and the Institution’s agreement to delay publication or disclosure of such Institution Disclosures in accordance with the time lines set forth in this Section 8.3, the Principal Investigator and Institution agree not to publicly disclose or permit the public disclosure of any Institution Disclosure which discloses any Identified Key until twelve (12) months following the date that Company and the Institution mutually agree in writing that the Key reported by the Institution to Company is deemed an Identified Key, all in accordance with the terms set forth in Section 5.3. The parties agree that the first public disclosure for each Identified Key shall be in a written manuscript to be published in a peer-reviewed

scientific journal. During the twelve (12) month period described in this Section 8.3, the Principal Investigator shall be permitted to submit to a scientific journal for publication, any abstract or manuscript which discloses an Identified Key, provided that, the Principal Investigator and the Institution notify the Company Principal Investigator of their desire to do so prior to any such submission and each provides Company with reasonable assurance that publication of such manuscript or abstract shall not occur prior to the twelve (12) month period described above. For clarity, the terms set forth in this Section 8.3 shall not in any manner limit Company’s right to review any Institution Disclosure which discloses an Identified Key in accordance with the time lines set forth in Sections 8.1 and 8.2.


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Confidentiality Concerns

Research Institutions vs. Biotech Company vs. Big Pharma

Length of Confidentiality Obligations Balancing Reasonable with Realistic

How to Prevent Leakage


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Confidentiality ~ Length Research Institutions

Length must be reasonable and must be a date certain (statutory retention)

3 years after agreement ends –not from disclosure date

Rare exceptions – Principal Investigator must agree and initial confidentiality provision Huge burden on PI and Institution

Biotech Company 5 years from each disclosure date

Big Pharma Follow statutory limits, normal time frame of 5-10

years End date must be explicitly defined


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How To Prevent Confidentiality Leaks

We Agree . . . Education, communication and good

contract management are critical We Disagree . . .

Starting length of obligations from “end of agreement” vs. “date of disclosure”

Explicitly naming all persons bound by agreement – should be PI’s responsibility Unrealistic in Research Institution


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Indemnification Concerns

Needs

Allocation of Risk in Clinical Setting

Real World Deal Breakers


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Our Indemnification Needs

Seek broadest indemnification possible Full indemnity – Sponsor’s drug/Sponsor’s protocol –

Institution does what Sponsor says (“arising out of the activities…”)

Product liability Defects in design or manufacture of drug

Sponsor’s negligence

Use of Institution’s results - least amount of coverage Institution’s protocol; and Sponsor has little or no control over what Institution does; Then Sponsor must indemnify Institution for Sponsor’s use of

Institution’s results Institution can only indemnify Sponsor for Institution’s

negligence (to the extent authorized by Constitution and laws of State of Texas


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Our Indemnification Needs

Must include proper parties System, Regents, Institution, officers, employees, agents

Should cover all kinds of claims Claims, demands, costs, liabilities, or judgments

Should broadly cover us if we do exactly what Sponsor directs us to do – “Full Indemnity” “Arising out of the activities to be carried out under this

Ag” Should also include Sponsor’s use of our results Carve-outs

Our negligence voids Sponsor’s indemnification If Sponsor wants to control the defense – “subject to

the statutory duties of the Texas Attorney General”


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Indemnification ~ Allocation of Risk

Sponsor’s Protocol and Sponsor’s Drug We receive no $ from Sponsor after Study is done Sponsor stands to gain a lot of money from the study Sponsor must broadly indemnify us if we do exactly what

Sponsor directs us to do (“Full Indemnity”) Institution’s Protocol and Sponsor’s Drug

Sponsor should bear all risk b/c it stands to gain a lot financially

Sponsor must also indemnify us for its use of our results

Sponsor can control defense and settlement only … “subject to the statutory duties of the Texas

Attorney General”


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Indemnification ~ Real World Deal

Breakers Sponsor won’t broadly indemnify us for

following their protocol and using their drug

Sponsor wants a mirror indemnity - not only ‘as to our negligence’

Sponsor won’t indemnify us for its use of our results (standard CTA and principal investigator initiated protocol)

Sponsor won’t agree to include language that allows them to control defense


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SUMMARY Critical Deal Concepts That May

Profoundly Impact Your Negotiations: Intellectual Property Publication Confidentiality Indemnification

Intellectual Property Basics and Sticking Points for Negotiating Research Agreements BethLynn...

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