COMMERCIALISATION Flashcards

1
Q

EFFECTIVE MANAGEMENT

A
  • Optimization – identify IP, ensure ideas are explored;
  • Enrichment – update IP, ensure it stays current/relevant;
  • Safeguarding – ensure IP is protected (via registration), via business practices, or if necessary, enforcement
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2
Q

AUDITS

A
  • Identify what IP the business generates/uses, whether it owns or controls the IP, and how to remedy any defects in ownership/control.
  • Conducting Audits from time to time
  • Why have regular audits and maintain records?
  • Litigation
  • Sale (or public securities offering, merger or acquisition etc)
  • Day-to-day management (dealings with IP)
  • IP Audit Process:
  • Questions to ask include:
     What kind of IP is it?
  • If IP is confidential business info – locate evidence of how it is protected (and if not protected, what you can do immediately to protect it).
     Who developed/created/invented the IP? [title/ownership issue]
     Under what sort of agreement or contract? (created by employee, etc.)
     When was it developed?
     What is the importance of the IP to your organisation’s activities?
     What potentially new IP is being developed?
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3
Q

IP VALUATION

A
  • Advantages of IP valuation include:
  • Knowing which is the valuable IP (perhaps within a large portfolio) and determining:
     which needs to be protected fully;
     which is the IP of no significant value;
     which might be sold or abandoned;
  • Creating new and diverse revenue streams, especially from underused IP;
  • Establishing a realistic price, for negotiating transactions;
  • Deciding whether to commence litigation to protect a patent.
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4
Q

BASIC METHODS OF IP VALUATION

A

a. Cost
 What would production of the asset cost today?
b. Market
 What would a market pay for comparable assets?
c. Income
 What is the current value of the potential earnings stream or cashflow from the asset?

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5
Q

LITIGATION

A
  • Should you litigate?
  • Generally involves significant costs, time and resources
  • Is litigation likely to achieve the business objectives of the enterprise?
     Considerations incl the type of remedies, the appropriate Defendant, risks from counterclaims
  • In essence – compare alleged infringing act with scope of exclusive right(s)
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6
Q

LETTER OF DEMAND

A
  • Before Litigating – Letter of Demand (alternative to heading straight to litigation)
  • One of the most effective mechanisms for resolving dispute
  • Letter should discuss:
     Specific form of IP allegedly infringed (eg registration details)
     Description of alleged infringing act (incl date)
     Request recipient cease to act infringing manner
     Seek response within a reasonable time frame (eg 1-2 weeks, depending on circumstances)
  • Beware of unjustified threat – but valid action is a defence
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7
Q

ADR

A
  • Mediation – independent person facilitate settlement
  • Arbitration – result determined by tribunal
  • Useful where
  • dispute re technical (not legal) matter
  • Dispute relates to international contract
  • Common for parties to invoke UNCITRAL arbitration/conciliation rules
  • Note also Arbitration and Mediation Center of the World Intellectual Property Organization (the WIPO Center)
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8
Q

INTERNATIONAL ENFORCEMENT

A
  • Added complexity and cost
  • Foreign jurisdiction
  • Unfamiliar context and rules
  • Could be significantly more expensive eg US, EU
  • Practical consideration – established competitor, with stronger market position
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9
Q

INJUNCTIONS

A
  • Interlocutory (‘trial before the trial’) or final
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10
Q

DAMAGES OR ACCOUNT OF PROFITS

A
  • Plaintiff must choose between the two – not both
  • See Copyright Act s 115(2); Patents Act s 122(1); TM Act s 126
     Damages
  • Compensate Pl
     Account of profits
  • Strip Df of ‘ill-gotten gains’
  • Damages – 2 measures
  • If Pl would be prepared to authorised – reasonable licence fee
  • If competitors – Pl’s loss profits
  • Potential for additional damages
  • Account of profits
  • Difficulty of apportioning value
  • Eg only part of Df’s copyright work
  • Or patent on a component of Df’s product
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11
Q

MONETARY ORDERS

A
  • Siddell v Vickers (1892) 9 RPC 152,162:
  • ‘Accounts … very seldom result in anything satisfactory to anybody. The litigation is enormous, the expense is great and the time consumed is out of all proportion to the advantage ultimately attained.’
  • Account of profits apportionment –
  • Eg Dart Industries v Décor (1993) 179 CLR 101
     Whole product or just part of the product so only part of profit.
     They took whole product in this case.
     But have to consider the money etc that went into them developing the product.
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12
Q

LITIGATION COST ORDERS

A
  • Cost of all proceedings – Question of who pays
  • In discretion of the court
  • Generally – follows the event
  • i.e. successful litigant receives cost order in their favour (portion)
  • Types of costs
  • Court costs
  • Legal costs – solicitor
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13
Q

COMMERCIALISING IP

A
  1. DIY – Start-up company.
  2. Collaborate – Joint Venture
  3. Utilise others’ established IP – Franchises
    - Each to some extent will utilize:
    * Selling IP – Assignment
    * Permit others to commercialise IP – Licensing
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14
Q

ASSIGNMENT

A
  • The effect
  • E.g. - In copyright
     Assignor, absent provision to the contrary, is divested of control of economic rights
  • may be an infringer, and be sued by the new owner
    o But note moral rights constraints
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15
Q

OTHER ISSUES WITH ASSIGNMENT

A
  • What is or is not property
     This is relevant question because you can do some things with property that you cannot do with other subject matter – mortgage, sell it, dispose by will.
  • Formalities of assignment at law
     Patents Act, s14(1): assignment must be in writing & signed
     Copyright Act, 196(3): an assignment of copyright (whether total or partial), does not have effect unless it is in writing & signed
     Designs Act, s11: owner may assign by writing
     Cf TM Act – no formalities prescribed in the Act
  • Dividing assignment
     By location
  • Under Patents Act, s14(2); Copyright Act, s196(2); Designs Act, s11(1).
  • Cf TM Act, s106(2): may be partial to goods/services, but in relation to use of a TM in a particular area.
     Other divisibility
  • Copyright Act, s196(2): contemplates divisibility by duration i.e. for ‘part of the period for which copyright is to subsist’.
  • Designs Act, s11(1): contemplates all or part of owner’s interest being assigned.
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16
Q

LICENCING

A
  • LICENSOR: (grants the permission to exercise IP rights)
  • shares risk of commercialisation
  • gets monetary compensation
  • LICENSEE: (receives permission to exercise IP rights)
  • shares costs of development
  • has access to an established product/service
  • gets assistance in relation to technical & other know-how
17
Q

TYPES OF LICENCES

A
  • Exclusive licence: Licensor does not offer anyone else a licence to exercise the exclusive right covering that area
  • *Licensee has standing to sue
  • Sole: Similarly, an exclusive license BUT the licensor retains the right to use the IP rights themselves
  • Non-exclusive: The licensor has the right to grant other licenses which cover the same object or area
18
Q

LICENCE EXTENT OF GRANT AND FIELD OF USE

A
  • Ensure that you are clear about what you can and can’t do with the license rights
     What jurisdiction?
     How long do the rights last?
     Is the licence exclusive or not?
     Is there a sub-licensing right?
  • Eg ‘Licensor A hereby grants Licensor B a non-exclusive licence to exploit the patents referred to in Schedule 1 for a period of 10 years from the date of this licence in the field of human diagnostics throughout Australia in consideration of Licensee B paying Licensor A a royalty rate of 5% of net sales revenue earned by Licensee B from such exploitation.’
19
Q

OTHER CLAUSES THAT MAY BE NEGOTIATED IN LICENCE

A
  • Improvements (stronger party usually wants control of improvements).
  • IP enforcement against third parties
  • Warranties or indemnities (in case infringing or mistakes down track. Indemnified against negligence down track).
  • Confidentiality (know-how might exist – confidential agreement in relation).
  • Technical assistance
  • Remuneration (TBD)
  • Records, reports and auditing
  • Best efforts
  • Grounds for termination
  • Dispute Resolution – Mediation / Arbitration (in event of dispute).
  • Governing Law (again in event of dispute which jurisdictions law to be applied).
20
Q

WHAT IS A ROYALTY

A

The monetary income earned by a licensor in return for granting rights to use its IP’ (McGinness)
- Each party start with valuation – considering market rates, costs of replacement/production, and likely income streams

21
Q

4 FUNDAMENTAL COMPONENTS OF A ROYALTY

A
  1. Structure for payment
  2. Rate
  3. Basis of calculation
  4. Mechanism to manage the payment
22
Q

PAYMENT STRUCTURES

A
  • Up-front / milestone payment
  • Creditable against royalty obligations?
  • Refundable?
     Provide incentives for licensee:
  • Milestone payments
    o Eg – regulatory approval; full registration (if provisional)
  • Sliding scale royalty rate increase
     Protect licensor:
  • Minimum royalty
  • Agree on timing of payments
     Shipment of orders; delivery to customer; invoicing or payment
  • Royalties
23
Q

WHICH STRUCTURES BENEFIT WHICH PARTY

A
  • Advances – lump sum payment
     Beneficial to owner. Also very clear cut.
  • Royalties – pay more the more use/sell the IP
     More work in determining royalty.
24
Q

RATE OF ROYALTY

A
  • Balancing of multiple factors
  • Comparable industry rates may be useful starting point
  • Depends on the context - eg compare litigation or arm’s length commercial negotiation
25
Q

RATE OF ROYALTY FACTORS

A
  • Legal protection
  • Scope/type of licence
     Incl duration, territory; exclusive/non-exclusive; field of use
  • Advantages over old tech
  • Profitability
  • Competitive technology
  • Stage of development of technology
  • Degree of investment needed of licensee
     Eg testing, clinical trials, prototypes
  • Cost of litigation
26
Q

BASIS OF ROYALTY CALCULATION

A
  • Measures using
  • Description of financial gain by licensee (eg gross/net sales or profits
  • Amount of licensed technology exploited by licensee (unit sales/manufactured)
  • Examples
  • % of net sales for licensed product
  • Fixed fee per input unit for manufacturing process
27
Q

MANAGEMENT OF ROYALTIES

A
  • Consequences of non-payment
  • Financial – eg additional amount / interest
  • Must not be a ‘penalty’
  • Ability to terminate (subject to notice)
  • Require periodical royalty statements/reports
  • Audit requirements
  • Ensure compliance with licence agreement
  • Nominate independent auditor