business, technology, and innovation 1 intellectual property & innovation lecture 6 spring 2014...
TRANSCRIPT
Business, Technology, and Innovation
1
Intellectual Property & Innovation
Lecture 6Spring 2014
Professor Adam DellUniversity of Texas School of Law
Business, Technology, and Innovation 2
Basic Questions What is Intellectual Property? Why have IP Rights?
Nonrivalry, nonexcludability & free-rider concerns
Why Limit IP Rights? Contrast Commonly unlimited times for
ownership of property. “Information wants to be free?”
Business, Technology, and Innovation 3
Different Types of Rights in Info Trade Secret
e.g., formula for Coca Cola, method of manufacture, customer info
Utility Patent (hereinafter “patent”) e.g., genetically engineered organism, various
software and “business methods” Design Patents and Plant Patents Copyright
e.g., book, movie, song, software Trademark
Business, Technology, and Innovation 4
Patent law
What is a patent? What can it cover? What are the legal requirements? How do you get one? Patent Trolls Examples
Business, Technology, and Innovation 5
What is a patent?
A “right to exclude” (35 U.S.C. § 154)
For a “limited tim[e]” (U.S. Constitution)
In other words, it is a government sanctioned monopoly on the invention covered by the patent. The goal is to maximize the public good by incentivizing innovation via a limited monopoly.
Business, Technology, and Innovation 6
Subject Matter, Duration, Rights Subject Matter: Useful application of idea or
knowledge, as embodied in novel and nonobvious product or process
Duration: 20 years from filing date of patent application Previously 17 years from patent issuance
Right against making, selling or offering for sale, using, and importing No requirement of copying No “fair use” defense Frequent challenges of patents’ validity
Business, Technology, and Innovation 7
What can a patent cover?
Processes Making/using a product; Sequence of steps;
Materials used; Process parameters; new use patents
Products Machines; Compositions of matter; Manufacture
(catchall category) Product by Process
Description of how to make a product.
Business, Technology, and Innovation 8
What can a patent cover?
Okay, what does that actually mean? Historically, many things could not be patented. However, in modern patent law, you can patent just
about anything that is not an abstract idea or a natural law or phenomena. You cannot patent e = mc2, but you could patent an energy
conversion device based on that principle. You cannot patent a computer algorithm, which is
essentially a mathematical equation. The modern workaround: call it a method for performing some
task embedded in a computer processing system.
Business, Technology, and Innovation 9
What can a patent cover?
Other examples Bacteria genetically engineered to produce insulin
I.e., Genentech’s original claim to fame Amazon’s One Click
Termed a Business Method Patent. Transistors infused with hafnium to improve
performance I.e., Intel High-k Silicon Technology
Intermittent windshield wipers For those of you old enough to remember… See US Patent 3602790
Business, Technology, and Innovation 10
Legal Requirements Utility
Invention has to do something Novel
Has to be something new to the art Why would we grant a monopoly on something that’s
already been thought of? Non-obvious
We don’t want to grant patents on things so glaringly obvious that no one had ever thought to file a patent on it.
Disclosure Have to actually disclose the invention
Enablement Disclosure has to tell the world how to actually practice the
invention.
Business, Technology, and Innovation 11
How do you get one?
Prosecution and Examination Getting a patent granted US patents only enforceable in the US. Must file in other
countries if you want protection there. Fortunately, standardized via WIPO and PCT.
Interference Trying to stop someone else from getting one
Licensing Obtain or grant an exclusive or non-exclusive right to a
patent Litigation
Suing someone to enforce your patent(s), or to invalidate theirs
Business, Technology, and Innovation 12
How do you get one?
Note: There are many rules and regulations behind the exact timing required to obtain a patent. We will not cover those here.
Under America Invents Act, the U.S. transitions from a First to Invent patent system to a system where priority is given to the first inventor to file a patent application.
Suffice it to say that in the US you must file with the US Patent and Trademark Office within one year of disclosure. DO NOT disclose your invention to the public before filing with the USPTO, or your invention will be conveyed into the public domain.
Business, Technology, and Innovation 13
Patent Trolls
Very difficult to define what a patent troll is. In essence, it is a group whose business model is to
aggregate patents and then sue infringers. Their revenues are derived from the damages or settlements arising out of these lawsuits.
But, we cannot define them as an entity without an intent to commercialize technology who asserts its rights. That could also describe a research university.
Business, Technology, and Innovation 14
Patent Trolls
Why do we care about trolls? Some say they are a drain on our economy since they sue
everyone in sight. If a troll sues your startup, the uncertainty surrounding
litigation will greatly hamper your ability to raise funds and the litigation itself will drain your coffers.
Trolls maintain that they represent inventors who would otherwise never realize any returns from their labor.
Why are there so many now? They have been energized by the dot-com bust. After 2000
you had many failed startups which had accumulated many patents, and selling the patents to a troll was often the only way to monetize that investment in the wake of the bust.
Business, Technology, and Innovation 15
Examples
SCO SCO Group sued various licensees of Linux,
claiming that it owned the source code of UNIX, portions of which were being illegally used without license in Linux.
Novell sued SCO, claiming that it never handed over copyright ownership of UNIX, and won.
Many consider SCO a patent troll Though, in this case, it was over copyright, but the
overall idea is the same
Business, Technology, and Innovation 16
Examples Genetics Institute
Founded in 1980 by Harvard scientists. Developed many cutting edge treatments. EPO – treat anemia
Lost in court to Amgen after several rounds of litigation Won in Europe and Japan continued to sell there
Factor VIII – treat hemophilia Cross-licensed patents with Genentech to avoid litigation Sued Baxter for infringement, they settled
tPA – dissolve blood clots (treat heart attacks, strokes) Found to infringe on Genentech patents
BMP-2 – accelerate bone growth Successfully licensed
And various others While technologically very impressive, GI never made much money largely
because it lost out on the rights to EPO. GI was ultimately acquired by American Home Products Corporation in 1997,
which purchased remaining outstanding shares of GI (40% of the company) for approximately $1.3 billion.
Imagine if GI had won its suits and held several of the crown jewels of both Amgen (market cap: $63.91B) and Genentech ($102.02B.)
Business, Technology, and Innovation 17
Examples
Amgen v. Genetics Institute In 1987, two startups, Genetics Institute (GI) and Amgen
filed for patents on erythropoietin (EPO) within weeks of each other.
Upon issuance of the patents, the two companies sued each other.
GI’s patent described purified EPO and several of its characteristics. It was found to be non-enabling; it did not tell anyone how to make EPO.
Amgen’s patent was found valid and GI was subsequently found to infringe.
Amgen has made over $22 billion from EPO (reported up to 2005) and has become one of the world’s dominant biotech companies. GI was bought out by AHP in 1997.
Business, Technology, and Innovation 18
Some Thoughts from a VC’s perspective Essentially technology companies are bought for either: capability (IP) or
customers ($).
Because they couldn’t have built it themselves….this applies to stuff that’s hard to build because they lack the people or the ideas.
Because they can use it as a weapon against competitors-important only in an IP landscape
BUT LOOK…INCREASE IN US PATENT APPLICATIONS
2013
Business, Technology, and Innovation 19
________________________600,000
________________________500,000
Business, Technology, and Innovation 20
There must be value…or VCs think they do.
Business, Technology, and Innovation 21
There must be value…or VCs think they do.
A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers. In some jurisdictions, such secrets are referred to as "confidential information" or "classified information".
Business, Technology, and Innovation 22
My View…
Patents are a valuable way to protect investments in R&D.
They are abused like many components of our legal system, but in general they work.
The Patent Office needs to figure out a way to issue patent requests, and respond to patent challenges faster in order to keep pace with innovation.
VCs think about and care about patents, but it’s usually just one of many considerations in evaluating a deal and very rarely is it a deciding factor.
How much I know about patent and trademark law should be some indication to you of the relative value of patents in the real world of company building. ;)