CENSIS white paper: Intellectual Property in Business

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Intellectual Property in Business: IP basics, IP management, IP strategy IP Basics for Start-ups (continued) 5. R&D contracts ‘Collaborative innovation’ has become a standard in today’s technology world. Companies collaborate with universities, key suppliers, content developers and also communities (makers, DIY, customers). Equally, young tech ventures are often interested in advancing their product development through R&D projects funded either by public organisations or on a co-development shared-risk basis with other companies (joint ventures). In any of these arrangements, there are some issues that start-ups (and their partners) should be aware of and pay attention to. If neglected, these matters could cause some serious trouble and lead to time and money wasted. Tracking IP rights Intellectual property generated in one project (foreground IP) might become background IP in further research projects. Therefore, companies should ‘track’ how their IP portfolio is utilised in diverse projects in order to ensure that companies comply with contractual obligations; after all, each project is likely to differ in its IP terms and conditions. For example, a collaboration or JV contract might oblige a company to license into the project some of its background IP to secure its use for the purpose of the project (for example, to conduct the R&D work). The contract may also include a licence for the background IP to be commercially exploited with the foreground IP. In this scenario, the company can only legally do this if the background IP has not been exclusively licensed to another party (i.e., for the same use, term and territory). Another scenario could involve the company exploiting the IP rights in a contractually prohibited manner (for example, by approaching international companies first instead of domestic ones). In such scenarios, a company faces a breach of contract on one side and a serious strategic risk on the other side. Exploitation rights All parties involved in the R&D project should clearly define the exploitation rights (for example, to manufacture, distribute, market, sell, license or sublicense) in a written agreement. They should also document the negotiation process (the intentions expressed, main goals, responsibilities and IP ownership). This can be done, for example, through memos from meetings approved by all parties or email correspondence. It is worth paying attention to these matters because such documents could help to clarify any misunderstandings that arise later. Companies should record whether they have full, limited or joint rights over IP generated through collaborative R&D projects, including any further specification of exploitation rights, such as market sectors, applications or territories. This is essential information for IP commercialisation, including portfolio evaluation or negotiations about commercial terms (for example, in tech licensing or M&A). 13,14 Take-home message: I would recommend including R&D, licensing and IP assignment contracts in the IP register and linking these contracts with IP rights they refer to. Track and record contractual obligations and exploitation rights resulting from R&D contracts behind your IP assets. No dedicated software is required at the beginning – as with recording initial IP rights, a simple Excel spreadsheet should do the job. Do not underestimate the importance of this work – it is critical to risk mitigation. 13 Mergers and acquisitions. 14 Carolline Steinbock Villiarroel, ‘Intellectual Property and R&D Contracts – a closer relation between patent portfolio and contract to guide and enhance strategic innovation decision’ (Master Thesis, University of Gothenburg, 2010) 56, accessed 2 December 2022. 16
Intellectual Property in Business: IP basics, IP management, IP strategy IP Basics for Start-ups (continued) 6 Some practical IP tips for start-ups As a start-up, you should focus on IP as soon as possible and consider filing patent applications in the most relevant countries. In a high-tech world, patents matter most, and the countries you look at should reflect the supply chain for your market. For example, you might consider countries where your product/components are manufactured, countries with distribution channels and countries where your endusers are. Based on my experience in tech licensing, having a US patent (application) in your portfolio will work to your advantage. The US remains a good, solid and attractive market for so many technologies, and a US patent will increase the value of your IP portfolio and appeal to investors. One quick clarification is useful here: it is common for early start-ups to file a patent application for one solution which can be protected in various countries (in this way, you build a so-called patent family). Do it before you have a final product and remember that perfect is the enemy of good. Get the first patent application filed. As you move ahead with commercial plans and product development, you will have time and ideas on how to expand and refine the overall IP protection of your technology. When it comes to patenting, I recommend focusing your efforts – in particular the first patent applications – on your product (the product-market fit). The claimed features should correspond to your product and the value proposition (see Appendix 2). You do not want to waste money on something that has little to do with your business. (The other benefits from your IP portfolio, such as a stronger negotiating position, positive image and having valuable assets in an innovative company, will organically follow.) One other important thing: file a patent application before you make any public announcement (even an online post or conference talk) about your solution: how it works, its features or operational parameters (in other words, anything technical). Such an announcement could completely ruin your chances of getting a patent, as it will be detrimental to the novelty requirement (i.e., that a solution has not been disclosed prior to the filing date: this requirement prevents prior art from being re-patented). Some jurisdictions 15 allow a mitigation instrument called a ‘grace period’ (six or 12 months) 16 that allows inventors to make disclosures of their own inventions before filing for a patent. It works but I would suggest that rather than overcomplicate the patenting process, it is preferable to remember a simple rule: do not disclose anything about your invention before filing a patent application. Another early-stage tip is to start your own IP research for your inventions/solutions. Free patent and trade mark databases are available (e.g. Espacenet from the European Patent Office) and you can run the first search of relevant patents, trade marks or designs on your own. Regarding the results you get from patent searches, I would say that generating hundreds of documents indicates that your search is too broad and needs to be narrowed down. Based on experience, a few dozen records are to be expected. If you intend to study all these documents, the task may appear challenging, yet it should be feasible. You could scan the abstracts first and then dive into the full documents (and claims). Doing your own patent search will help you get a feel for what kind of patents are being filed in the area you are working in; it may also reveal relevant prior art that may be directly related to your own solution. These insights will help you to figure out how to draft your first patent application. Therefore, it is worthwhile to get your head around inventions being patented in your field and the activities of your competitors (see also the section on Identify IP opportunities for your company – the sources of information). Yes, you can pass everything on to your patent attorney, but even experts will need feeds from you in order to draft a final patent application, decide about the claims and run IP searches. Remember: this is about YOUR application(s) that will serve YOUR business. IP attorneys will advise you to the best of their knowledge but their advice will be based on information you provide. 15 Not the UK. 16 Six months – e.g., Turkey, San Marino, Albania. | 12 months – e.g., USA, Australia, Chile, South Korea. 17
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