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
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?
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.
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?
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)
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
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)
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
9
Q
INJUNCTIONS
A
- Interlocutory (‘trial before the trial’) or final
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
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.
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
13
Q
COMMERCIALISING IP
A
- DIY – Start-up company.
- Collaborate – Joint Venture
- Utilise others’ established IP – Franchises
- Each to some extent will utilize:
* Selling IP – Assignment
* Permit others to commercialise IP – Licensing
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
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.
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
- Structure for payment
- Rate
- Basis of calculation
- 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
