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Theme 3 Strategic Use of Intellectual Capital: IP Audits and Leveraging IP Assets in Business Strategy
Jeremy Lack Geneva, 11.7.06
Medabiotech Quadrant Chambers Etude Ziegler, Poncet. Grumbach, Carrad, Luscher
NB. These notes are intended for general information only. They contain inaccuracies and should not be relied on as a substitute for advice of counsel. They are provided to WIPO-INSME students solely as reference materials. They may not be copied, used or disseminated without the express written consent of the author. All rights reserved. 1
J. Lack 2006


Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR

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Medabiotechs Perspective on IP & SMEs:

We bring ideas to Life

Specialized Life Sciences venture consultants & venture capitalists active since 1998 Clients: multinationals, govts., universities, TTOs, incubators, start-ups and investors
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Medabiotech: > 20 Start-Up Companies since 1998

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SMEs are entrepreneurial catalysts for innovation. IP Aligns the Interests of Science/Technology, Finance and Industry

21st Century Asset Management

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New Stakeholders are focusing on IP

Traditional IP Stakeholders
Inventors Authors




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New IP Stakeholders + New interests = More confusion and disputes




Multiple Inventors Authors

VCs Investors
Financial Institutions

Technology Transfer Companies



Governments Indigenous Populations

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Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR

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What is Intellectual Property?

The purpose of Intellectual Property Rights = Recognition of expertise & promotion of innovation. They provide barriers to competition and incentives for investment.
IP = Property that is not physical (e.g., ideas), that can only be protected and enforced by a spectrum of national laws, that change at international borders, subject to formal national requirements.
A - Copyrights B - Trademarks C - Trade Secrets D - Domain Names (not strictly speaking an IP right) E - Utility Models F - Designs Rights (a.k.a. Design Patents) G - Utility Patents H - Miscellaneous (e.g., unfair competition, passing off/goodwill, semiconductor topographies)
Four questions to always bear in mind (country-by-country):

1. Is there valid IP here? 2. Who does it belong to? 3. Am I free to use it? 4. How can I protect it?
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What is rationale for each IP right?

Type Copyrights / Authors Rights Databases Trade secrets Domain Names Designs Purpose Rights relating to original/creative works, including literary, dramatic, musical, artistic works (incl. software) Sui generis rights for substantial investments in obtaining, verifying or presenting data Rights given to owners of confidential information (technical or commercial) that is valuable, specific, and ascertainable, and which is treated as such Right to a unique alpha-numeric addresses on the Internet obtained from ICANN Rights to original appearance of the whole or a part of an industrial or handcrafted product resulting from the features of the lines, contours, colours, shape, texture, and/or materials used. Rights to exclude others from practising inventions that are useful, novel and nonobvious in exchange for publishing this information Rights to exclusive use of words, symbols, objects, colours, sounds, smells etc. by which consumers can identify the source of products or services (by classes of goods or services). Potential Lifespan Life of author + 5070 years 15 years from creation Indefinite Indefinite 3 (unregistered) or 25 (registered) years (14 in USA) 20 years from date of application Indefinite

Patents Trademarks


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How are IP Rights Created?

Automatically (e.g., ) By use (e.g., , EU designs) By actions (e.g., trade secrets) By nature of investments (e.g., databases) By registration (e.g., patents, , designs)

This variety of ways creates confusion and a general lack of awareness of IP assets, which many companies may be wasting.
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Why Obtain/Enforce IP Rights?

Pride Identity Recognition Control over use Privileged relationships (with consumers/customers/partners) Protect existing products/vested interests (defensive) Create barriers to entry for competitors (offensive) To have a currency in certain industries (trade/cross-license) To generate revenues (royalties) To obtain investments (equity) Have have assets that can be pledged (loans) To show corporate governance In case of liquidation KNOW WHO YOU ARE AND WHY YOU ARE INTERESTED IN IP


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E.g., Pharma Industry Requires Strong IP Protection

70% of R&D Costs Are Incurred before Clinical Trials Cannot raise money without IP and cannot afford to get IP wrong!
Source: Boston Consulting Group: A Revolution in R&D 2001
$900 $800 Dollars in Millions $700 $600 $500 $400 $300 $200 $100 $0 $165
Target ID 1 yr


$620 $530 $410 $370 $165 $205

Target Validation 2 yrs

Stage Cost Cumulative Cost




Clinical 7 yrs

Screening Optimization Pre-clinical 1.1 yrs 2 yrs 1.6 yrs

Biology 3 years

Chemistry 3.1 years

Stage of Development

Development 8.6 years

= TOTAL 14.7 years


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The Increased Visibility Of IP: What Is At Stake?

The value of IP is growing but cannot be accurately forecast in an increasingly global and technological world. Our valuation methodologies and laws are inefficient. This will lead to more IP disputes It is estimated that by 2007, as much as 90% of the value of the worlds top 2000 enterprises will consist of intellectual property
Building and Enforcing Intellectual Property Value, An International Guide for the Boardroom 2003

PriceWaterhouseCoopers How appropriate is our system developed for a world in which physical assets predominated for an economy in which value increasingly is embodied in ideas rather than tangible capital? Alan Greenspan April 4, 2003
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What is the nature of an IP asset?

Bundles of national and territorial rights

Rights to exclude others (NB, not to practise)

Rights considered as property (financial assets), which can be pledged and securitized THE CHALLENGE = How to convert national, legal rights to exclude into global, commercial revenue-generating assets?


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Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR


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Traditional Thinking: IP is done at the beginning

Company grows


More rounds of financing

Sales & markets

Strategic partnerships
Management/Structure of company

Regulatory strategy & clinics

Product development First round financing

Development of technology / product Proof of concept

Business plan
Seed funding Invention

Protection of invention

Entrepreneur Transfer of technology

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Start-up creation

But, IP is important throughout

IP + Money = O2: Lifeline of the company
Company grows


More rounds of financing

Sales & markets

Strategic partnerships Product development

Management/Structure of company

First round financing

Development of technology / product Proof of concept

Business plan
Seed funding Invention

Protection of invention

Entrepreneur Transfer of technology

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Start-up creation


All Property => A Bundle of Rights

Privileges of Ownership
Use (1 = Sale of products) Sale (2 = Assignment / M&A) Transfer Part of the Rights (3 = License) Merge (4 = JV / Alliance) Mortgage Gift


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Possible Revenue-Generating Strategies Using IP

Sell Products: Usually a one-way street, with all IP rights exhausted (internationally or domestically) (e.g., INTEL) License/Rent Product: Better to retain rights & maintain some control (e.g., transgenic mice, software: restrict access to source code & use) Sale of IP: a) Assignment of IP assets: May be simplest (e.g., 3M Post-It) b) License of IP Assets: How? M&A: Sell company including the IP in it (e.g., a holding entity) Joint Ventures: Alliances that pool their IP resources into a new company (e.g., Nanonics) Franchise: Package concept (e.g., McDonalds): what is the IP bundle (TM + + Know-How + patents)? Quality Control and brand management issues? Create Market: Offer for free and then charge using installed base (e.g., Skype) Open Source/Freeware/Shareware & then charge for improvements (e.g., .php) Covenant not to sue? (e.g., Two start-ups to avoid depleting resources) IP Holding companies? Who should hold IP? Tax and financing issues: inter-company pricing and royalty considerations.
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The Need For A Strategy

Examples also show that the possession of a patent portfolio on its own is not a guarantee of success. Instead, it is the way in which the company uses that portfolio that is crucial, which is why it is so important for investors to understand patents and what they can be used to achieve. No investor or financial institution can responsibly assume that company management will automatically get it right; the truth is that most company managements know very little about the subject.


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No one-size fits all solution: you need to innovate with your IP as well Each strategy will be person, time and industry-specific (e.g., Intel at first Intel today) Think it through: costs and timing issues What are your most important IP rights? What are your cash needs? What are your greatest concerns (SWOT analysis)?

What would your competitors like to know?

What are your main trade secrets ? Are they sufficiently understood and identified? What do you want to protect & how can this be done? What feels right in your local culture/industry? How are you communicating your IPs value? Do you have the right relationship with your IP counsel? (Each SME is unique and over the course if time will know itself what is best. Avoid GIGO and constant turnovers).
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Three stages to any IP strategy

1 Creation & recognition (IDENTIFY) (automatic through registration only) a) audits and regular reviews 2 Value Generation (MANAGE) a) Preservation b) Budget and accounting c) Revenue generation (licensing and sales) d) Financing considerations 3 Enforcement (PROTECT)
Need to budget and plan globally Need to use the right experts at each stage Need to be organized internally & internationally
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Issues for Creation/Recognition


Key personnel Ownership rights Holding of IP Budgeting over time (e.g., 5 + 5 + 5 rule) When to file? Who to use? Creating libraries Benchmarking prior art
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The Importance Of Clear & Clean Ownership 1.


Collective Rights Countries:

Unanimity is required for any transfer of rights to take place, such as the grant of a nonexclusive license (e.g. CH, UK, JP)

Severable Rights Countries:

a) Partial Independence: Each co-owner can grant nonexclusive licenses, subject to informing others and sharing proceeds (e.g., FR) b) Full Independence: Each co-owner can grant nonexclusive licenses. Period! (e.g., US)


All Countries sole co-owner cannot grant exclusivity: Unanimity always necessary to grant exclusive

licenses or assign rights. NB: Can be dangerous if not all inventors are listed and validity remains unaffected (e.g., CH).


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IP Geographical Considerations
Where to Register Where to Protect Where to Own Your IP
Where are you based? Where is competitor based? What are your most important markets (by volume, by profits)? What are countries of threat? Timing and likelihood of success? Ease & costs of enforcement?

Provisional applications v. formal applications?

National + PCT (buy some time?) Limit utility patents (e.g., in 5 countries only) but register TMs internationally (always consider EU design rights and trademarks) Consider G8 (plus China and India: IP assets there are increasing in value) Ultimately, owner of company may determine this. It is often tax or fiscally driven (e.g., withholding taxes, dividend taxes, inter-co finance)
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Monitor and Never Underestimate your Competition

Although you need to remain focused, it is essential to track others: Attend industry meetings and hear what is being said Read the trade & VC journals (many free online periodicals) Track your competitors IP portfolio (e.g., do automated patent watches). Check also universities and important leaders in your space (although there is an 18 month blackout period).

Use the Internet for Competitive Intelligence (e.g., Google Alert).

What can you find out about them? Check also scientific publications. For Trademarks, this is essential! For Freedom to Operate also. Although this can become obsessive and too expensive, it is worth doing something. Freedom to Operate may change from one day to the next, and you need to be ready to react and be prepared. Try to maintain cordial relations with your competitors. It may be worth compiling a prior art portfolio on them (e.g., secret disclosures if necessary). Paradoxically, this can improve relations. But, be careful of Anti-Trust/Unfair Competition restrictions. (Cannot be too friendly with your competitors either: Never share pricing or divide markets). THE VALUE OF YOUR IP MAY DEPEND ON THEIR ACTIVITIES


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Innovate Constantly & Manage the Process

Contact designated IP attorney

Set up an internal system so that whenever an employee comes up with an invention, there is a reporting and communication system that exists and captures key dates and information. Best practice is to use Invention Disclosure Forms (a) Do a search (b) Summarize invention in view of prior art (c) Think of applications for your invention (d) Think of how other will try to design Drawings around or copy it Figures
Related art(*)
BLOCKS SHOW KEY ISSUES TO BE COVERED ON AN INVENTION DISCLOSURE FORM: Contributors Signatures (*) NB include prior uses of the invention; conferences, offers to sell
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Description of invention Improvements advantages

Leverage IP Value Over Time

Use automatic intangibles at first (e.g., trade secrets and ) Register limited duration rights (e.g., designs, patents) Establish parameters for strong indefinite IP rights File international trademarks and drive brand values over long term Expand the brand range/revenues (e.g., soccer + phones) A first licensee drives up value
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E.g., patents + trademarks


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The Value Of Managed /s


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Create Positive Synergies Across the IP Spectrum

IP rights are seldom mutually exclusive. Think of them over time and collectively. Best formula is to generate synergies (e.g., Design + TM). Some examples:
COPYRIGHT + KNOW-HOW (=TS): Almost always there. License together. PATENT + TRADEMARK: e.g., Patent only in G8 countries, but TM worldwide (all Madrid Protocol) . NB: TMs over the long term can be worth more dont expire! DOMAIN NAME + TRADEMARK: Recommended in (almost) 100% of cases. TRADE SECRET + TRADEMARK: Dont disclose the secret but build up the brand (e.g., 7X). Describe results of TS but not the how. COPYRIGHTS + TRADE SECRET: E.g of software: license and restrict access to source code. Program protection: have auto-delete if source code is breached. COPYRIGHT + TRADEMARK: Very common in entertainment industry. E.g., HARRY POTTER COPYRIGHT + DESIGN + UTILITY MODEL: Very common in Europe. PATENT + TRADE SECRET: All patents start as TS, but you can still separate e.g., product (patented) from process (kept as trade secret). But be careful of US Best Mode issues. Also beware of invalidity that may result from misleading indications in patent application. COPYRIGHTS + 3D TRADEMARK + BRAND NAME TRADEMARK + DESIGNS + UTILITY PATENT: Why not? Is often done.
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VALUE CREATION Legal v. Business IP Cultures


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LEGAL APPROACH: Reliance on National Laws All company employees are bound by duties of secrecy with respect to their activities. All relevant IP belongs to the employer. This may have criminal law sanctions. There also exist non-compete contract clauses.

The duty of confidentiality survives the termination of employment.

NB: Employees in other companies (e.g., clients) are not bound by duties of confidentiality unless there is a contract providing for this. Make sure that an agreement with another company extends to all its employees and consultants as well, and limit the information given. Certain classes of personnel require special agreements : - temporary staff (e.g., trainees, students) - external consultants - university researchers & professors
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But Compliance is Not Enough: You Need to Shift Your Companys Awareness



(sales support, R&D, competence)



(policies, reporting, IP reporting systems)


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SOME BASIC QUESTIONS: 1 - What are your most important IP rights? 2 What are your greatest future interests and concerns? 3 What would your competitors like to know about you?

4 What are your main trade secrets ? Are they sufficiently understood, identified and protected?
5 What do you want to protect & how can this be done? 6 What feels right in your local culture? 7 How often is IP included in your regular reports?


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Culture of Protection: Thinking Beyond Law & Core IP

Business Culture (e.g., Planning for meetings; Documentation; Methods of doing business)

Commercial Industrial Property (e.g., Copyrights, Trademarks, Designs, Commercial Trade Secrets)

Core Industrial Property (e.g., Patents, Technical Trade Secrets)

Our value chain comprises technical, social and commercial processes

Elkem, EBS Pamphlet

Source: Elkem, T. Gule

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Expanding The Outer Square


Given the importance of global technology and speed, Know-How ( Trade Secrets) has an increasing role to play and is often overlooked. Knowledge of costs, sources, or processes is sometimes hard to protect. New competitors are always appearing. Legalistic approach is too limited. Companies therefore need to educate all employees and have them create a new protection culture that is creative and proactive. IP needs to be expanded and new non-traditional IP barriers need to be found and created. What analyses are needed? Some examples of possible approaches
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E.g., Prepare for Meetings As a Team: Do a Disclosure Strategy Chart

(never show)

(only under CDA)



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Self-Assessments: Audit Your Proprietary Advantages

Technological Commercial (e.g., pricing & logistics; knowledge of industry) Efficiency in process (e.g., machinery, waste reduction) Pricing strategies (e.g., flexible & linked to meeting clients goals) Business stability & relations (e.g., customer loyalty) Clear Corporate ID : Label/Logo & Mission Statement Customized Products and Design features Enforceable IP rights Political & governmental relations Status and stability of personnel (are you a value-added employer?) THESE ARE ALL WORTH IDENTIFYING AND PROTECTING!
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Other Examples of Possible Protection Strategies

Integrate this way of thinking with your customers & help them use it

Constant innovation: Keep ahead of the competition

Add new value-added production steps or co-sell value-added products Create proprietary diagnostic tools: use proprietary specifications or calibration standards that cannot be replicated by competitors Constantly assess reverse engineering risks Consider selling consultancy with customized product range vs. sales of generic products (e.g., cost + AND ask for % of customers savings) Create new brand and submarket to each client as personalized ( 123VX ) Create data intake forms, whose relevance cannot be understood

Use different codes and cross-reference checklists to hide internal data (e.g., internal product catalogue that is not the same as customers catalogue) Danger: Can become confusing!
Possible new packaging and safety features Re-assess Key Account identification and contact measures. Does the whole team need to be involved? Manager only? Implement clear confidentiality and information access policies
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Be Aware of Your Own Business Culture

Many companies overlook a key feature of their own organisation namely, their own organisation. The architecture of a company, both internally and externally (including its reporting structures, incentive mechanisms and know-how), is itself a source of intellectual property and contributes to the creation of other intellectual property. The economic role of intellectual property

Nooman Haque and Greg Smith Deloitte


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Overall Advice
IP Strategies require multidisciplinary skills and constant audits (why, what, how, how much, deadlines?) Create regular IP review meetings (bimonthly at latest) Develop your own in-house expertise


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Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy


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Possible Litigation Strategies for Financing Using IP

Damages can be very lucrative (e.g., Polaroid) But market share can be more important (e.g., Kodak)

Combining resources and suing (trolls)

Building up a war chest (e.g., in Asia), then sue (e.g., in USA) Consider contingency fee lawyers (e.g., Lemelson/Hosier) Opposition and filing / delay strategies Multi-jurisdictional litigations (e.g., Germany v. UK v. FR) Generic Co. strategies: go for weak patents & be first in generics space Check insurance policies & protection partnerships Opinion letters (protection v. wilful infringement) Practice prior art and make prior offer for sale if wont patent ADR often best, even if post-dispute -- e.g., use WIPO MED-ARB clauses.


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IP = Global, but national: Key differences exist

Different rights: e.g., Registered v. use creates rights (e.g., v. ), Different standards of inventorship/ownership Different impacts of co-ownership (see later) Different enforcement: venues, jurisdictions, scopes of relief, judges US patent issues: e.g., 1st to invent, subjective duties (prior art & best mode) Antitrust and Competition Law issues (e.g., new EU TTBER 2004) A valid national IP right an internationally valid/enforceable IP right = COMPLEX, EXPENSIVE, INCONSISTENT, INEFFICIENT

+ Poor valuation tools and different methodologies (e.g., scope, validity?)

+ Confusion between rights to exclude v. freedom to operate + Scopes of licenses:

what IP, worldwide, exclusive, delegable, revocable, access rights ?

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Issues For Management

Part 1: Key Questions:

1. Venue: Where? 2. Representation: Who to hire? 3. Elements to be proven 4. Possible remedies: What can we get? 5. Cost: How much? 6. Time: How long? 7. Risk: How strong is my case? (success rates?)
Part 2: ADR & Mediation


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Overall: Why Litigate? What Do You Wish To Achieve?
Know why you are litigating! Possible reasons: Stop competition Obtain a license Claim (co-)ownership Infringe but gain market share Make competitor spend time and money Create a precedent & enforce strength of IP Make money (e.g., trolls, Lemelson) Destroy competitors barriers to entry

Obtain visibility
Emotions, egos & anger
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Question 1: Where to Litigate?

Domicile of Defendants Where defendants are manufacturing or selling (most?) Where tort/damage happens Where the IP is registered (court v. admin proceedings) e.g., Washington DC Where laws are most favorable for IP owner / infringer Where cost/risk benefit is better Where lawyers are best/most capable Where procedural advantages exist:
Discovery (common law countries) Saisie en contrefaon (with court bailiff/huissier) Bifurcated court system (e.g., Germany: validity v. infringement)

Where remedy is broader (e.g., Euro- or torpedo injunctions)

= All elements at maximizing damage to opponent and increasing your chances of winning.
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Question 2: Who to Hire?

Specialist consultants can be useful in many situations, but technical subspecialization and national laws within IP makes them essential. Lawyers also have Attorney/Client or Work Product privilege that protects your communications from discovery. Purpose is: so client can confide completely in their attorneys to check compliance. There are 3 Different types of IP Attorneys 1 General Business Lawyers (Solicitors) 2 Litigation Lawyers (Barristers) 3 IP Agents / IP Attorneys: NB In EU are not lawyers. A combination of 3+2 or 3+1 above may be necessary But be careful you have the right experts for the right countries, technologies, courts (e.g., admin v. court proceedings) & are thinking holistically.
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Question 3: Elements to be Proven

Plaintiff: Copying & derivation Defendant: Unknown, independent generation

Plaintiff: Likelihood of confusion (e.g., surveys, consumer errors) & dilution Defendant: Invalidity, misuse of TM, abandonment, lack of confusion

Domain Names:
Plaintiff: confusing/identical + no rights/interests + bad faith Defendant: any one of no confusion, right/interest, good faith interest

Design Rights:
Plaintiff: overall impression on informed user Defendant: invalidity, functionality, no similarity on informed user, prior art

Trade Secrets:
Plaintiff: Efforts to keep TS + Duty of care + breach of duty of care Defendant: No efforts to keep TS, no duty of care, in public domain, reverse engineered, no breach (will also depend on terms of contract, if CDA-based)

Plaintiff: Product covered by all elements of a claim (directly or by equivalence) Defendant: Invalidity, non-infringement (missing element of claim), practicing prior art, inequitable conduct, filewrapper estoppel


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Question 4: Possible Remedies

Preliminary injunction/Temporary restraining order Emergency measures Act quickly & prove irreparable harm

Damages + interest
Lost profits Reasonable royalty Defendants profits

Declaratory judgment (e.g., of invalidity or non-infringement)

Permanent injunction Willful infringement or contrefaon aggrave Specific performance (e.g., of a contractual provision)


Astreinte = daily penalty for continued infringement

Accounting Costs & attorneys fees

Action en revendication: to be added to or replace listed inventor

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Questions 5-7: Risk/Cost/Time?

Top Ten Patent Litigation Jurisdictions by Number of Patent Infringement Cases for 1997-2001 (Source: Michael C. Elmer, Finnegan Hendersen, 2005) No. Country No. of Lawsuits Filed Historical % of Decisions In Favour of Patent Owner 59% or 68% 46% 41% 55% --20% -25% Typical Costs per Case (US$) 3.5 M 450 K 1.7 M 750 K --1.5 M -1M Typical Time to 1st Judgment (months) 30 24 20 37 --26 -14

1 2 3 4 5

USA China Germany France S. Korea

11,652 4,894 3,850 1,862 1,651 1,478 1,186 620 601

Source: Finnegan 6 Taiwan Henderson Global 7 Survey Japan Patent

8 9

Brazil UK








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Part 2: ADR & Mediation


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National Litigation: The EPILADY Cases


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National Litigation: Review Country-by-Country

Depends on nature of case: Litigators will look at remedies/damages first, legal theories second. Statistics on patents: Can get very sophisticated Cf. presentation by Michael Elmer of January 2001


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The National Dilemma in Cross-Border Enforcement

Ever more frequently, one experiences the same patent being litigated in more than one European jurisdiction. This has very often given rise to what I believe to be the most interesting aspect of the topic under consideration: the differences which have arisen in jurisprudence which reflect a difference in philosophy and even in culture when it comes to construing patent claims. As one of the London patent judges recently stated: 'Intellectual Property litigation in general and patent litigation in particular in Europe is in a state of some disarray. Judge Michael Fysh Patents County Court (UK)


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IP litigation is like a piece of cheese

Perceptions = 9/10 of reality!
The invention is =
a triangle

a rectangle a square

ADR of IP disputes is bound to be better than national litigation!

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Typical Approaches To Dispute Resolution

Source: J. Kalowski


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A dispute is never about what it is about

Although the objective aspects of the dispute may be apparent

The Facts The Law(s) Misunderstandings Needs Concerns Fears Feelings Emotions Perceptions Interests Values

the subjective aspects remain to be discovered.

Source: Achille Grosvernier


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What is the Truth: Young Girl or Old Lady?


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Dispute Resolution Mechanisms Available

Least Evaluative Least Structured Least Formal
Source: J. Kalowski


Consensual Parties in control


Most Evaluative Most Structured Most Formal


Adversarial Third party in control

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Arbitration v.

Source: Joanna Kalowski




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Source: Joanna Kalowski


P1 M


Subjective Fairness


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What Distinguishes Mediation from Arbitration? PAST Preparation

Source: Joanna Kalowski




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Mediation Can Create Options that Tribunals Cannot

Source: Joanna Kalowski


Pre-mediation: Opening Preliminary Conference Parties opening statements

Summarising and Agenda setting Exploration of issues Private Sessions Option Generation (v.Alternatives) Negotiation(s)
(joint & private sessions)



Agreement/ Closure

Post-mediation: Enforcement of agreement

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Mediation can seek options for mutual gain

See Getting to Yes

Separate the people from the problem

Look to the future

Focus on interests v. positions Communicate respective understandings Assess alternatives (BATNA/WATNA/PATNA) Seek/invent options for mutual gain Use objective criteria


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For enforcement: Mediation + Arbitration = Faster Cheaper Better

They are complementary, synergistic and can help provide complete dispute resolution solutions. Possible combinations: MED-ARB, ARB-MED and MEDALOA.


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Introduction Background & fundamentals Creating a business strategy Litigation as an IP strategy IP & HR


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Human Resources & IP

A companys IP assets is intrinsically linked to its personnel For start-ups, this is all there is starting off But even later-stage companies are >50% based on IP, which indirectly reflects its employees Human Resources has a crucial role to play in
a) understanding IP and b) managing and retaining IP across all levels of the company

Requires more than a legal compliance culture Also a business interest culture Starts off with education of ALL levels of company personnel Conduct regular audits accordingly
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Levels of Human Resource Issues

Board of directors Executives All levels of staff Consultants and advisors


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IP Issues for Directors


Executive v. Non-Executive directors Personal knowledge Responsibilities & Restrictions Balance sheets & valuations Litigation exposure IP insurance Accurate lists of assets Fiduciary responsibilities
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IP Issues for Executives

Business units v. country roles Key IP management positions within company:
Human Resources R&D Legal IP Dept Trademarks Sales & Marketing (incl. advertising) Business Development & Licensing Public relations Regulatory Manufacturing QA/QC CFO Tax

Who coordinates? Who reports? Who manages? Requires a Holistic approach


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IP Issues for all staff


National laws Signing-on & employment contracts Entry interviews Initial training (handbooks, policies) Ongoing education (e.g., s) Records & document management Termination & departure Exit interviews Follow-up with future employers Regular IP audits and review meetings
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Employment: Three Basic IP Principles

Three important clauses in employment contracts that require consideration:

Confidentiality: No secrets from previous employers should be brought in. Likewise, the companys secrets need to be protected. Each employee is in daily contact with company trade secrets, whether technical or commercial. His/her knowledge and cooperation in protecting these company trade secrets and improvements creates real barriers to entry for competitors. All employees should be bound by obligations of confidentiality even after they leave their employment. (NB: There can be criminal as well as civil penalties for breach). This needs to be understood and respected by employees throughout their careers & after leaving. Non-Compete: Each key employee should agree not to work for a competitor without the employers consent for a definite period of time after leaving the company (e.g., 12 months). In exchange, the company may agree to subsidize them for a while to incentivize them to work in a different industry, where their knowledge and expertise cannot help the competition. Although this may appear at first to be an unreasonable restriction on freedom of movement of individuals, this may be crucial for an SME. There is a clear collective benefit for remaining employees, whose jobs are safer. Departing employee can usually work just as easily in related industries (and get a subsidy). The employer feels safer and can invest more to train its staff. Invention Assignment: All improvements and inventions that relate to the industry should belong to the employer. The employee should help the company to comply with all necessary procedures. It is in all employees interests that all the companys inventions are properly identified and protected by it. Otherwise IP rights may often become unenforceable and competitors get a free ride.




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Ownership of Employees IP Rights

Varies by country Three situations:

IP created in scope of business activities IP is created using the companys resources IP is possible due to information gained working for the company

Scholarly works Guidelines: e.g.


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Termination of Employment
Painful and tricky Inhumane but safe v. Kind but risky Audits of IP assets & risks (by dept and category of IP) Check electronic copies and access to electronic info. Rely on and be consistent with HR policies Exit interviews are crucial Restrictions can be difficult: scope, time, geography Paid gardening leave need to balance protection with fairness Non-solicitation obligations Follow up with new employers can help (but also be tricky) E.g.,
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Two typical situations

Independent consultants Employed consultants

Four questions to always bear in mind (country-bycountry): 1. Is there valid IP here? 2. Who does it belong to? 3. Am I free to use it? 4. How can I protect it?


Conflicts of commitment Conflicts of interest Freedom to use their ideas? Ownership? (Can they assign?)
J. Lack 2006

Remember IP Co-Ownership Issues


Collective Rights Countries: Unanimity is required for any transfer of

rights to take place, such as the grant of a non-exclusive license (e.g. CH, UK, JP). Consultant needs consent to provide rights to third parties.

Severable Rights Countries: a) Partial Independence: Each co-owner can grant non-exclusive

licenses, subject to informing others and sharing proceeds (e.g., FR). Consultant can give to competitors but will have to pay a reasonable proportion. NEED NON-COMPETE OR CONSENT REQUIREMENT CLAUSES. Period! (e.g., US). Consultant free to do as he/she likes! NEED NONCOMPETE OR CONSENT REQUIREMENT CLAUSES.

b) Full Independence: Each co-owner can grant non-exclusive licenses. 3. All Countries sole co-owner cannot grant exclusivity: Unanimity
always necessary to grant exclusive licenses or assign rights. NB: Can be dangerous if not all inventors are listed and validity remains unaffected (e.g., CH). IF YOU WILL WANT TO BE ABLE TO GRANT EXCLUSIVE RIGHTS, YOU NEED A CLEAR CONTRACT WITH CONSULTANT.
J. Lack 2006

IP & Consultants

Presumption of ownership w/ Consultant Assignment Control Previous licenses/rights Indemnification issues Moral rights (esp. in situations) Confidentiality Improvements (benefits from other projects)
J. Lack 2006


Audit Contracts with Key Consultants

Consultancy agreement provisions Advisory Board agreements Focus Group agreements JV provisions (e.g.,

Spin-offs & start-ups (e.g.,


Ownership, confidentiality, freedom to use, modify, improve etc. provisions?

J. Lack 2006

Understand why you are interested in IP Keep track of relevant IP and manage it appropriately Have an IP Steering Committee and set an IP Strategy Your ability to implement your business plan and receive financing increasingly depends on this Have an enforcement strategy Your employees and consultants are essential stakeholders in this process. Educate and manage them accordingly.
J. Lack 2006