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Intellectual Property (IP) refers to the protection of creations of the mind, which have both a moral and a commercial value. In general terms, IP is any product of the human intellect that the law protects from unauthorized use by others. In some ways, "IP" isn't a whole lot different from the kinds of property you deal with every day, like personal property (your car, your television, your prized carved coconut collection) or real property (your house and the land it's on)--you can own it, you can sell it, and you can lend it out. However, very much unlike personal property or real property, IP is not a tangible thing that you can touch or see. Also unlike personal or real property, IP can be divided up over and over again without diminishing its value. If you divide your land and sell part of it, what you have left is clearly worth less than the whole property was. In contrast, the holder of a copyright, for example, can license a bookstore to sell copies of the copyrighted work, and the value of the copyright isn't diminished at all by each sale of the work. IP law typically grants the author of an intellectual creation exclusive rights for exploiting and benefiting from their creation. However, these rights, also called monopoly right of exploitation, are limited in scope, duration and geographical extent. IP protection is intended to stimulate the creativity of the human mind for the benefit of all by ensuring that the advantages derived from exploiting a creation benefit the creator. This will encourage creative activity and allow investors in research and development a fair return on their investment. IP confers on individuals, enterprises or other entities the right to exclude others from the use of their creations. Consequently, intellectual property rights (IPRs) may have a direct and substantial impact on industry and trade as the owner of an IPR may - through the enforcement of such a right - prevent the manufacture, use or sale of a product which incorporates the IPR. For this reason control over the intangible asset (IPR) connotes control of the product and markets. IP protection encourages the publication, distribution and disclosure of the creation to the public, rather than keeping it secret while at the same time encouraging commercial enterprises to select creative works for exploitation. IP legal titles relates to the acquisition and use of a range of rights covering different type of creations. These may be industrial or literary and artistic.
The stated objective of most IP law (with the exception of trademarks) is to "Promote progress." By exchanging limited exclusive rights for disclosure of inventions and creative works, society and the patentee/copyright owner mutually benefit, and an incentive is created for inventors and authors to create and disclose their work. Some commentators have noted that the objective of IP legislators and those who support its implementation appears to be "absolute protection". "If some IP is desirable because it encourages innovation, they reason, more is better. The thinking is that creators will not have sufficient incentive to invent unless they are legally entitled to capture the full social value of their inventions". This absolute protection or full value view treats IP as another type of "real" property, typically adopting its law and rhetoric. IPR’s are customarily divided into two main areas: (i) Copyright and rights related to copyright: The rights of authors of literary and artistic works (such as books and other writings, musical compositions, paintings, sculpture, computer programs and films) are protected by copyright, for a minimum period of 50 years after the death of the author. Also protected through copyright and related (sometimes referred to as “neighbouring”) rights are the rights of performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) and broadcasting organizations. The main social purpose of protection of copyright and related rights is to encourage and reward creative work. (ii) Industrial property: Industrial property can usefully be divided into two main areas: One area can be characterized as the protection of distinctive signs, in particular trademarks (which distinguish the goods or services of one undertaking from those of other undertakings) and geographical indications (which identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin). The protection of such distinctive signs aims to stimulate and ensure fair competition and to protect consumers, by enabling them to make informed choices between various goods and services. The protection may last indefinitely, provided the sign in question continues to be distinctive. Other types of industrial property are protected primarily to stimulate innovation, design and the creation of technology. In this category fall inventions (protected by patents), industrial designs and trade secrets. The social purpose is to provide protection for the results of investment in the development of new technology, thus giving the incentive and means to finance research and development activities. A functioning IP regime should also facilitate the transfer of technology in the form of foreign direct investment, joint ventures and licensing. The protection is usually given for a finite term (typically 20 years in the case of patents). While the basic social objectives of IP protection are as outlined above, it should also be noted that the exclusive rights given are generally subject to a number of limitations and exceptions, aimed at fine-tuning the balance that has to be found between the legitimate interests of right holders and of users.
The ownership of IP inherently creates a limited monopoly in the protected property. By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish. IP is traditionally comprised of four categories: patent, copyright, trademark and trade secrets. The products of the human intellect that comprise the subject matter of IP are typically characterized as non-rivalrous public goods. Essentially, this means that the same product may be used simultaneously by more than one person without diminishing the availability of that product for use by others. In the words of Thomas Jefferson: "If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me." The law of IP can be seen as analogous to the law of tangible property in that both consist of a bundle of rights conferred upon the property owner. However, the law of IP is separate and distinct from the law of tangible property. Where the right of exclusive possession is at the core of the bundle of rights protecting real and personal property, land and chattels, the same cannot be said of IP. The law of IP is commonly understood as providing an incentive to authors and inventors to produce works for the benefit of the public by regulating the public's use of such works in order to ensure that authors and inventors are compensated for their efforts.
As scientific knowledge has expanded and allowed new industries to arise in fields such as biotechnology and nanotechnology, originators of technology have sought IP protection for the new technologies. Patents have been granted for living organisms. The increase in terms of protection is particularly seen in relation to copyright, which has recently been the subject of serial extensions in the United States and in Europe. With no need for registration or copyright notices, this is thought to have led to an increase in orphan works (copyrighted works for which the copyright owner cannot be contacted), a problem that has been noticed and addressed by governmental bodies around the world. Also with respect to copyright, the American film industry helped to change the social construct of intellectual property via its trade organization, the Motion Picture Association of America. In amicus briefs in important cases, in lobbying before Congress, and in its statements to the public, the MPAA has advocated strong protection of intellectual-property rights. In framing its presentations, the association has claimed that people are entitled to the property that is produced by their labor. Additionally Congress's awareness of the position of the United States as the world's largest producer of films has made it convenient to expand the conception of intellectual property. These doctrinal reforms have further strengthened the industry, lending the MPAA even more power and authority. The growth of the Internet, and particularly distributed search engines like Kazaa and Gnutella, have represented a challenge for copyright policy. The Recording Industry Association of America, in particular, has been on the front lines of the fight against copyright infringement, which the industry calls "piracy". The electronic age has seen an increase in the attempt to use software-based digital rights management tools to restrict the copying and use of digitally based works. Laws such as the Digital Millennium Copyright Act have been enacted, that use criminal law to prevent any circumvention of software used to enforce digital rights management systems. Equivalent provisions, to prevent circumvention of copyright protection have existed in EU for some time, and are being expanded in, for example, Article 6 and 7 the Copyright Directive. Other examples are Article 7 of the Software Directive of 1991 (91/250/EEC), and the Conditional Access Directive of 1998 (98/84/EEC). This can hinder legal uses, affecting public domain works, limitations and exceptions to copyright, or uses allowed by the copyright holder. Some copyleft licenses, like GNU GPL 3, are designed to counter that. Laws may permit circumvention under specific conditions like when it is necessary to achieve interoperability with the circumventor's program, or for accessibility reasons; however, distribution of circumvention tools or instructions may be illegal. In the context of trademarks, this expansion has been driven by international efforts to harmonise the definition of "trademark", as exemplified by the Agreement on Trade-Related Aspects of Intellectual Property Rights ratified in 1994, which formalized regulations for IP rights that had been handled by common law, or not at all, in member states. Pursuant to TRIPs, any sign which is "capable of distinguishing" the products or services of one business from the products or services of another business is capable of constituting a trademark.
Let us give us some tips for licensing IP: 1. Keep good records: Get in the habit of establishing and maintaining complete centralized agreement files. You get at least two significant advantages by doing this. First, if a license dispute erupts, the party with better agreement files has a significant early advantage. Secondly, if you ever want to sell your business, accurate and complete agreement files makes it easier for a potential buyer to conduct its due diligence while also enhancing how the potential buyer views your business. Quite simply, accurate and complete agreement files make your business more valuable. 2. Be diligent about enforcement from the start: A lot of inventors are under the misperception that they get a patent and the money rolls in. They don't realize there's a lot of work that goes into enforcing a patent. Once you get the patent, you have to pay attention to who may actually be using your invention. Parties who infringe your patents don't have to do it on purpose to be infringing. There's no intent requirement for patent infringement. It's unusual for a party to just come to you and say, 'We're using your patent and we want to get a license.' Look for the presence of your invention in other people's products or services. Managing that portfolio in an effective way becomes a bit of a logistical challenge. One has to be aware of inventions perhaps in many different fields and stay abreast of where they're being used. 3. Keep long-term relationships in mind: You need to understand what are the negotiable points and what are the 'don't even try because it's our policy (points)'. You can waste a whole lot of time and a whole lot of good will. License agreements aren't like selling a used car. You don't get the best deal you possibly can and run. You're going to be living together for a long time. Circumstances change, you need modifications, you don't know what your company's going to look like in five years. You've got to leave good will and understanding on both sides because you're going to be living with each other. You're really to some extent partners: (the company) wants stuff to get developed, (the licensee) wants you to be successful but at the same time they want a fair deal. It's a different style of negotiation. 4. Test quality before licensing, and maintain it after: In addition to doing test chips, we also ships tens of millions of chips in production. It gives you the confidence that you can work in volume. You want a proven product. If you're buying software package, if you can you want to make sure it's already been in production. If it's possible, you want to talk to people who have used it. It's kind of like building a house and talking to a contractor. It can be hard though, because sometimes the references are your competitors. Ongoing support is really important too. If it's somebody who just produces something and walks away, if you don't have ongoing support, that's a bad sign. 5. Assume the license is negotiable. We don't make changes to our form agreement is a phrase that companies like to use, but they rarely mean it. If you see something in the contract that is unreasonable, seems ambiguous, or is flat-out wrong, say something about it. Better yet, suggest something that works better. In my experience companies will nearly always work with you to either change their language or explain their reasons for keeping it as-is. I have never seen a deal implode because someone suggested changes in good faith. Most companies expect some negotiation as part of the process, regardless of what they might say to the contrary. 6. Navigate exclusivity carefully: One of the things that happen, especially with startups and companies that are developing something new, are that companies will want to incorporate their product line and will ask for exclusivity. It's a fair thing to ask for. As a start-up or as a relatively young company, you may not have the realization of the full potential of what's possible with your technology. You might be so excited to get the deal done you might give away the farm. You can get around it by building milestones or performance-based metrics to see whether or not we're actually achieving the kind of goals we set forth going into this. Exclusivity has come up as the No. 1 point of contention in negotiations. I don't think it’s fair to say avoid it completely. You just can't unless you are going to be able to wield enough power in the marketplace to say everybody's going to have this thing. 7. Define and prioritize deal boundaries: We begin by understanding the business implications on both sides and by defining the deal parameters, which may include assigning patents, licensing patents for a field of use, technology transfer, copyrights, royalties, buying a product line, etc. Once these are understood, we assign values to each. However, it is vitally important to understand what value the licensor puts on these different parameters. For example, they may only need a narrow field of use license for your IP and therefore would not pay a premium price. Putting a simple price tag on some IP without regard for how it enables the licensor to execute a strategy is a trap many falls into and a recipe for minimizing value or worse, deal failure. 8. Be flexible on price: Be prepared to negotiate on price, and be flexible on the type and timing of payments. Many payment types are used, such as up-front lump-sum payments, milestone payments for achieving product development or commercialization goals, or a running royalty after commercialization. More than one may be included in a deal. As for pricing, be aware of industry standards and remember that a licensor will propose payments that contemplate an expansive market and optimistic profit potential, while a licensee will view pricing through a prism of costs and risks including substantial costs to develop and commercialize a product, risks of lawsuit, and the uncertainty of changing markets. 9. Recognize different agendas: My joke is: The tech transfer offices are perceived as greedy and obstructionist; companies or the industry is perceived as being stingy and obstructionist. So the common ground is not necessarily a good common ground. You've got competing agendas: Larger tech transfer offices are being perceived and being tasked with being revenue-generating. You also have attitudes at some institutions that want lots of money up front: lots of licensing, fees, costs covered. Part of the dilemma is making sure you understand the culture of the organizations that you're dealing with. If you walk in knowing that a particular institution is going to want a huge amount of money and all their sum costs covered, you may not be able to get access to that technology. You may have to walk away. 10. Beware of what could happen to the license: If you enter into a paid-up license (when the licensee paid a one-time lump sum payment in lieu of future royalties) beware of assignment right: in the event a smaller licensee is acquired in the future by a larger company, if the license is assignable, the larger company may get a license without having to pay a dime to the patent owner. Make sure that in the event of licensee's insolvency or filing for bankruptcy, the license terminates automatically. If it doesn't, the license may be sold with other assets to a new buyer who will get the license without having to pay the IP owner.
Let us give some tips in drafting IP contracts which are as follows: 1. Draft contract terms to avoid litigation: Of paramount importance when drafting a contract is to avoid ending up in litigation. Draft contract terms with this goal in mind. Litigation is a terrible way to resolve disputes. It is very expensive and it takes away your mental energy. While you are in litigation you will have difficulty focusing on work and on your home life. They will both suffer. Litigation results are unpredictable and somewhat random. Lawsuits are a good way to get a final resolution of a dispute. But they are not designed to get the best possible resolution. Rather they focus on getting a resolution so that both parties can go on with their lives, getting that resolution in a somewhat timely manner, and getting that resolution at a reasonable price to the taxpayers who end up paying the costs of running the courthouse. Litigation results are never satisfying to either party. What you often get is a vague ruling from a judge with a dollar figure attached that seems to come out of the air. 2. Put everything in writing: All of the essential terms of your deal should be written down. A contract is a plan of action -- what the parties will do for each other. Think of it as a specialized business plan. Until you put the steps of the plan in writing, it is hard to see if you have left anything out. Until you put the plan in writing, it is hard to know if you and the other side are actually talking about the same thing. People's memories fade over time and people tend to remember agreements in their favor. But they cannot argue with the written word. Remember to put things in writing even if you are licensing IP from yourself. Many founders of companies have already created much of the IP that the company will use before the company was founded. Who owns that IP? Under what terms can the company use that IP? This should be clearly spelled out in writing. 3. Use attorneys to draft documents: Do not try to draft complex IP contracts yourself. Experienced IP attorneys know how to draft IP contracts. They know what to include and what traps to avoid. They understand how to draft a contract that works. I have heard and seen too many horror stories of clients who do it themselves, often cutting and pasting from other licensing agreements. Several of my clients ended up in litigation because they tried to save a little money by writing the licensing agreement themselves. They did not do a very good job. When problems arose, they ended up paying me far more to solve the problem through litigation than if they had just let the attorneys write the contract in the first place. Although I wish that you could just buy a form on-line or cut and paste from your last contract, it does not work. Don't try to do the attorney's job with a cut and paste job either. 4. Face problem areas up front: It is human nature to want to avoid conflict. There is the hope that if you delay a problem it will go away. But it does not work. The problem does not go away, it just gets worse. If there is a problem area between the parties, deal with it now. The time to discuss it and resolve the differences is at the beginning of the relationship. The problem will come up, and if it comes up later, your options are more limited, and you are much more likely to be unable to resolve the dispute and end up in litigation, which is something you want to avoid, see #1 above. 5. Plan for the unexpected: A contract should be a plan of action. But a contract should also deal up front with what will happen if the unexpected happens. What if things do not go according to plan? How should the parties deal with the unexpected? It is far easier to come to agreement on how to deal with the unexpected at the start of the relationship then after the unexpected has already happened. Go over your plan of action and try to think what could go wrong and what would happen if it did. This is another reason to use attorneys. We see lots of cases when things have gone wrong, and we are used to thinking that way. Clients rarely come back to their attorney to tell them the agreement worked exactly as planned. It is only when something goes wrong that they call their attorney. So attorneys are used to thinking about and planning for the unexpected. 6. Make the terms fair: If the contract terms are fair and reasonable, you are far less likely to have a dispute. You certainly want to try to negotiate a contact that is in your favor. But if the contract terms are too one-sided in favor of one party, the other party is less likely to want to perform, and you are more likely to end up in a dispute. Do you want to be in the IP licensing business or the litigation business? If you want to be in the IP licensing business, then draft a contract with reasonable terms so that both sides are able and willing to perform. That way you are not likely to end up in litigation. There is a difference between a contract that is a good deal for you, and one that is a totally in your favor. Many attorneys try to get the most one-sided contract that they can. They are not doing their clients any favors. They are just setting their clients up to end up in litigation. 7. Be wary of multiple agreements and/or attachments: Sometimes a deal consists of multiple agreements and/or an agreement with attachments and schedules. If so, then think through how they will work together. Too often the agreements are negotiated as separate contracts even though together they constitute one deal. Attachments are often added as an afterthought, after the negotiations are finished. Do all of the documents make sense together? Are they consistent? What happens if one of the deals falls apart, and the others do not? One way to avoid potential problems is to make separate deals that stand on their own whenever possible. 8. Say it in plain English: There is no need for a contract to use secret lawyer language that no one else can understand. Say it in plain English. If you don't know what it means, ask. Define technical terms, even if the parties know what they mean. It is fine to use acronyms, abbreviations, and initials in an early draft of a contract. But the final version of the contract should make sense to anyone, not just those in the know. First, there is less agreement on those shorthand terms than you may realize. Second, if there is a disagreement about the contract, the legal standard is what it would mean objectively to a normal person reading the contract, not what it means to the tech people. You never know who will be reading the agreement and trying to understand how it works. Remember that if you end up in litigation the ultimate arbiter will be a Judge, and most Judges have very limited technical knowledge. 9. Make sure you are agreeing to the same terms: When you think you have finished negotiating and you have come to an agreement, make sure you and the other party have agreed to the same terms. In the very old days, invoices and purchase agreements would fly back and forth by mail or personal delivery. A while back faxes would fly back and forth. Today it is usually emails and email attachments. It is very easy to think you have agreed to the same terms, when you are actually each referring to a different version of the contract. This type of misunderstanding happens more often than you might think. Make sure that you know what version you are agreeing to. When you think you have an agreement, pull all the contract terms together in one document and make it clear that this is the version you are all agreeing to. Make sure the contract fits your particular needs: Keep in mind what you are trying to accomplish with your new agreement. Too often clients and their attorneys jump right in and start to write the standard contract, whether it fits what the client needs or not. I always try to start with asking my client "what are trying to accomplish here?" Then I draft a contract that fits the client's needs. Write a contract that is easy to understand, fits your needs, is reasonably fair to both sides, and is likely to avoid litigation.
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