Unknown Speaker  0:00  
and welcome to today's webinar between a rock and a hard place best practices for competitive patent analysis and stos for university startups presented by Autumn. My name is Samantha Spiegel, autumns Professional Development Manager and I'll be your staff host for today. All lines have been muted to ensure high quality audio and today's session is being recorded. If you have a question for the panelists, we ask that you use the q&a feature rather than the chat feature. If you have a technical question or comment, please feel free to use the chat. Today's session may be eligible for CLE credit. Throughout the webinar, you will see pop up surveys that are simply asking for a yes or no answer. If you do not intend to apply for CLE credits, you may dismiss the poll by clicking on the X in the top right corner of the pop up window. If you do intend to apply for CLE credit, you must answer the question as it is asked everything you need to claim your CLE credit after the session is in the autumn Learning Center. For more information about CLE eligibility for the session, or what states have already approved the program, please contact me directly. Before we begin, I would like to take a moment to acknowledge and thank autumns 2021. Online Professional Development sponsor, we appreciate your ongoing support. I now have the pleasure of introducing you to today's presenters. John Christie is the Executive Director of the Office of Technology Transfer and intellectual property development at Tulane University and is responsible for the overall management, supervision and planning of activities within the office to a ns o t t strives to develop effective means of moving groundbreaking research from the laboratory to the commercial sphere where it can provide meaningful public benefit most often in the form of improved healthcare outcomes. Shawn Solberg has 21 years of experience as a patent attorney. He serves as the chair of both the intellectual property department and the business division at Dentons. Davis Brown, Shawn counsels, several technology transfer offices, and numerous startups on intellectual property manage matters, including patent protection, patent opinions and analyses, licensing other IP agreements and overall IP strategy relating to a wide variety of technologies. Welcome, John and Shawn, I will now turn it over to both of you. Thanks for being here.

Unknown Speaker  2:18  
Hey, thanks, Sammy. Can you hear me? Okay? Yeah. Excellent. All right. Let me share my screen. And please confirm that that has worked. Yeah, you're good to go. Alright, first, let me let me say that I don't know where you got that picture. Sammy, if we sent that to you, but that thing is like 15 years old, so they would know. So it's all good. I have a more update one updated one at the end of the presentation. So hello, everybody. As Sammy said, I'm Shawn Solberg. And my friend and colleague John Christie is joining me here we're going to talk a little bit about we are not advancing. That's interesting. Here we go. We're going to talk a little bit about university startups. And we're going to talk a little bit about freedom to operate analysis and the need for competitive patent landscape analysis for all startups and the implications that that creates for those startups with respect to their legal obligations to avoid willfulness once they become aware of potentially relevant patents. Obviously, we're doing this in the context of universities and tech transfer offices. And no, this is just not an this is not just an excuse for you to get ethics CLE credits, although that is a benefit. We think it's important for universities and tech transfer offices to have a good understanding of what the startups are facing and sort of the tensions between developing a full IP strategy including both patent protection and some level of freedom to operate understanding, while also managing within a limited budget. And so that's basically what we're going to be talking about today. And ultimately, it comes down to the law of willful infringement and the obligations that that creates, for startups, for any entity, but especially in the context of startups and the additional costs and obligations create potentially created by that, and where that originates from, and sort of how to best handle that. And so then we'll be talking about, you know, what universities and tech transfer offices can should be aware of number one should understand about what the startups are facing and how they can help. So with that in mind, let's dive right in. I apologize, where some of this will be fairly basic for some of you. Some of it will be fairly duplicative, but we want to start with kind of an introduction of an understanding of what Startup are facing and kind of difference between patentability and freedom to operate, and how that plays into what startups are focused on from an IP strategy perspective. And then we'll then I'm going to I'm going to dive into the exciting world of willfulness law and kind of talk through where we are with the legal obligations and what the requirements are for all entities, including startups. And we're going to talk about some case law recent case law from the last couple of years, and how that helps us to understand what startups need to be doing what and again, what universities and tech transfer offices can do to help out so. So,

Unknown Speaker  5:41  
John, do you mind if I look ahead a little bit so that our audience understands where we're going with this? Absolutely. In 20 years in a university tech transfer office working with startups, I have found that the distinction between patentability and freedom to operate is one that is is new to us, certainly the young entrepreneurs and more they need education. So we're hoping today to provide some, some grounding for tech transfer offices to provide that education to startups. And then also, I think, this concept of willfulness, which is, which is really interesting that John's gonna get into is really key to understanding all that. So that's the point is to help tech transfer offices help their startups does that sound right to you, Sean?

Unknown Speaker  6:24  
That's perfect. That's exactly right. So appreciate the additional input there. John, and I work together, I think this was our first presentation with just the two of us, although I think we've been on panels before so. So John knows, he's free to jump in with additional information, and he'll gleefully tell me when I'm wrong, as well. So So, okay, so with that in mind, and that introduction, let's talk a little bit about what we're facing and what startups are facing with respect to development of their IP strategy. As most know, already, it's not just about patent protection, it also has to be about an understanding of and hopefully some comfort around the idea of freedom to operate, and hopefully some, some information or comfort that there is some freedom to operate for the startup relating to their technology. And that is, because we're gonna get into more detail about this. As we go forward. Ultimate, ultimately, the exit strategy has to be kept in mind by the startup. And so while patent protection itself with respect to their technology is already fundamentally understood by all startups as as something that is a key first step. The other part of the IP strategy that many startups don't realize at the beginning of this process is that they also need to be considering freedom to operate because ultimately, whatever their liquidity event is going to be investors and or the acquirer are going to want to know that there is freedom to operate, they're not going to expect the startup is going to do a full fledged, super expensive freedom to operate analysis. But they need to given it consideration. In that context, you have the classic catch 22 of how do you raise money, you need the money in order to develop the IP strategy and to take the appropriate expensive steps to get there. But in many cases, when you're talking to investors, you need that IP strategy in place in order to raise money. So that's the classic tension, there is an additional second tension, which creates additional problems. And this is the one that sometimes gets missed or people aren't aware of that is in the context of a startup. Going out and becoming aware of their competitive patent landscape, which is a critical piece for them, they need to understand for purposes of conversations with investors and for their own comfort. They need to understand that they do have some level of freedom to operate visa vie their competitors patents, in the course of doing that they may become aware of potentially relevant patents Patents, which arguably they may be potentially infringing. That awareness creates potential additional obligations under willfulness law that's going to be talking about today is this additional obligation that is created potentially by awareness of third party patents? And, you know, how do you move forward under those constraints with these catch 20 twos in mind? So, all right. So, patentability versus freedom to operate, as John mentioned, this is an important concept. Many people understand it. I've been, you know, through this a few times, and you have a good grasp on this. But it's a subtle distinction. It's a critical but subtle distinction, because there is some overlap, but there is a fundamental difference between patentability. freedom to operate. A patent gives the right to exclude others. It does not if you have a patent if a startup obtains a patent, it does not at startup the the affirmative Right? to commercialize their technology, it does not provide freedom to operate. The third party patents in the landscape are what dictate whether you're able to commercialize your technology and thereby have freedom to operate. So one concept to keep in mind, one that's an interesting sort of, in some cases, for some people, somewhat surprising concept is that while a company doesn't actually need a patent to commercially commercialize their technology, but they do need freedom to operate, so patents become valuable because the commercialization becomes successful. And then people want to copy what you're doing. And so then that's when the patents become valuable. But up to that point, one of the key questions still remains whether you file patent applications or not, is do you have freedom to operate? Can you commercialize your technology without being sued for infringement. So we're going to do a simple example to explain the fundamental fundamental difference between patentability and freedom to operate. Do a lot of work with medical devices. So I'm using a stent example. Let's say that John invents the stent. He recognizes that there's an issue with blood vessels, clogging arteries clogging tissue in growth that creates restrictions within the vessel. So he creates a device that can be deployed into that vessel and expanded to create a to eliminate that restriction, essentially. So John, to his patent attorney, he files a patent application. And let's say that he gets a patent with this exemplary claim. So he has a claim to an expandable graft with these three limitations, a thin walled tubular member with slots, where in the tubular member has a first diameter for delivery, and then in a second expanded diameter for deployment within the vessel. So this, this is a claim that then excludes anyone else besides John and his startup from actually commercializing this stent. So we've created a Venn diagram, if you will, here on the left, this is the space that of stents that are covered by these three limitations within this claim that others can't play it. So this is the space that John can play in, but others cannot. Okay, so I come along, and I say, you know, I recognize that the stent is, is a very valuable and successful device. But there's a problem with tissue in growth. And the fact that even after the stent is deployed, after amount of an amount of time, tissue starts to grow in and get inside of that stent and start to expand and it creates the restriction that the stent was actually inserted to prevent in the first place or to eliminate. So I decided to come up with the idea of the drug eluting stent, I go to my patent attorney, I get a patent with this claim. Okay. So with this claim, I have if we go back for just a second, you'll notice that here are John's three limitations in his claim, the tubular member, and then the first and second diameters. If you'll notice in my claim, I also have the tubular member the first and second diameters, but added in is the concept of the active agent, the tubular member is embedded with this active agent. This is my claim, my claim is, let's assume patentable over and above John's claim, and so I get an issue patent. But look where my claim protection falls. The scope of my claim falls entirely within the world that John controls. That is the scope of his claim, is the larger blue circle, whereas my smaller yellow circle circle falls within that, that world of Johns so what does this mean? You'll now notice that even though John invented the stent, he is not able to send sell the drug balloons, or any drug eluting stent without infringing on my claims. Conversely, while I invented the drug eluting stent, I am clearly falling within the scope of John's claim. And so I can't sell the drug eluting stent because my drug eluting stent, let's go back to John's claim still satisfies all three limitations of John's claim. So while I have a patentable invention, and John has a patentable invention, neither of us actually have freedom to operate. Okay, the real world how does this play out? Ultimately, it comes down to commercial success, the drug eluting stent was historically a very important innovation and something that patients and doctors wanted. And so, so in that world of whether the drug eluting stent is so desirable, there will ultimately come a point where there is some sort of cross licensing deal, it might be led up to that by infringement litigation. But ultimately, you would expect that somebody's going to come out of this with a license of some kind. And typically, both entities come out with a license of some kind to sell drug eluting stents, with some exchanging of Maltese, etc. And that's in the real world, how it plays out. But this is why it's critical to understand the difference between patentability and freedom to operate. both John and I have patents, but neither of us have freedom to operate. And this is, this is ultimately what needs to be understood about the difference between patentability and freedom to operate when it comes to startups, getting out there and trying to commercialize their own technology. It's not just about patents. It also is about freedom to operate. John, you look like you're going to say something there. And he needs you want to add when you think

Unknown Speaker  15:56  
you're overriding my freedom to operate with my plane stance.

Unknown Speaker  16:00  
I just can't so your stance? Yes, right. That is correct. I will say that, you'll notice that because it's my example. I took the better stance. So Alright. Um, okay, so now we got the fundamentals out here. We've already talked about this, to some extent, the catch 22 When it comes to developing your strategy and the costs associated with that. And secondly, let's move that out. relationally. And separately, the the additional issue of the risk of willfulness and the obligations that that creates, startups must consider their targets, they must consider their investors or acquirers. They're going to want to hear about freedom to operate, they're going to want to know that you've considered freedom to operate. So how do you move forward with that, given these constraints and the ability and the potential that in doing some sort of landscape analysis, that ultimately you're going to become aware of some patents that create additional obligations with respect to avoiding willfulness and we're gonna get into that in some detail. So those don't work very well. Listing locks up alright. So typically, what you're talking about with startups, what needs to be done, what the preference, the preferred approach is sort of a patent mapping a patent landscape search. As most of you know, in order to do a freedom to operate analysis of any kind, you need to have a fixed commercial embodiment in place. So you have to have a good sense of what the startup is actually going to commercialize what that commercial embodiment is, of course, budget is always a consideration is always a concern. And as I mentioned already, investors and acquirers are going to want to hear not only about patent protection, but also about awareness of third party patents Do you have them to operate, a full analysis may not be necessary in the eyes of the investors. But they certainly want to know that you've considered it on some level level some sort of preliminary analysis and have identified that there aren't any red flags. So that's the context leading up to the situation where you get the results of your landscape analysis, and there is the risk of finding a blocking patent. So you want to know that your competitors don't have any patents that are an issue. But hypothetically, you could end up finding some patents that could potentially be causing problems for you, or your problems for your ability to commercialize without risking being sued for infringement by your competitor. So So what are your options? At that point? If you identify a blocking pattern, do you identify a highly relevant patent? Your options are at that point, if you want to move forward, you need to try and design your commercialized and bought your commercial, your commercial embodiment needs to be designed around those patents or that patent could potentially get a license. Or alternatively, and this is probably the most either the design around or the patent opinion is the most common approach. You can get a patent opinion, right. And that's typically the most most common approach, you can get an opinion from competent counsel that either you're not infringing, or that that patent is potentially invalid. Okay, that can provide you with some comfort, some protection, probably not from getting sued, but hopefully from being found liable for willful infringement. And that's what we're going to again, that's what we're gonna get into. So the solution here is potentially a freedom to operate an opinion, the problem is the cost. So we're going to talk about freedom to operate opinions. We're gonna talk a little bit about the details involved with freedom to operate opinions, but ultimately, you need to get an opinion from competent counsel that either you don't infringe or that the pet And is valid, as you probably know, patents based on the claims in that the claims are what define the invention. And so much of a freedom to operate analysis is based on a construction of those claims, and sort of the scope of what those claims cover. All right. And so that, again, adds additional crop cost if you have to reach that point. Okay. So let's talk about what is creating this obligation to do an analysis of any potentially relevant patents and unfortunately, having to spend more money to do it. It's willful infringement. Right? Let's say hypothetically, that you that an entity a startup might potentially be infringing patents, right. Certainly, that's not a desirable situation to be in. But it's even more undesirable if the startup has become aware of the patent and continue to infringe, even in the face of that awareness of the patent with could consider good could be considered to be no reasonable basis for believing that it's not infringing, or that the patent is invalid. All right. And if that happens, if sued for patent infringement, if a startup is sued for patent infringement, and if the patentee can make the assertion successfully, that the startup has been willful in their infringement, then that can cause triple damages, it can cause you to cause the startup to have to pay triple damages and potentially attorney fees as well. There are other obviously negative implications as well. But what we're really talking about is, in addition to being found liable for infringement, if you if the startup is found liable for infringement, suddenly the cost and the damages skyrocket as a result of this potential liability for willfulness is if if that is found to be the case as well. So what does a startup need to consider from the beginning? What are some willfulness defense factors? How do you prepare ahead of time to avoid willfulness, reasonable care with respect to patent rights, these are all sort of trigger trigger language from various cases, reasonable care with respect to patent rights, sound legal advice, so seek competent counsel, we're going to come come back to many of these independent development or design around now what's going on, here we go. or designing around the patent, reasonable belief that you're not actually infringing. Alright, and this is all judged under a totality of the circumstances if it actually ends up in a courtroom. So talk about looks like alright. So an opinion is only one factor, but it is one of the factors that the startup can control. So there's a blocking patent, an opinion is one step that a startup can take, in order to hopefully avoid willfulness. Now, there are requirements around that opinion that make it more costly, it has to be competent, it has to come from a qualified lawyer, it has to have all the relevant facts included, it can't be conclusory, it has to have all the supporting details, right? It needs to establish within the opinion, it has to send the message that there was a reasonable belief by the infringer that the actions were permissible. So it has to be thorough, it has to be detailed, it can't be conclusory. increased costs. And so this is why hopefully, you avoid the need to have a patent opinion. But these are things that need to be considered. We're going to talk about ways to avoid, avoid the patent opinions, if possible, but more importantly, to get a cost effective patent opinion, opinion where necessary. All right, quick summary of the law of willfulness over the years that brought us to this point. Back in 1983. Accused a friend infringers who are actually aware of the patent had an affirmative duty to confirm that they were not infringing, including seeking competent legal advice. This changed in 2000 2007. To them having no affirmative obligation, and they what was created by the court at that point was an objective recklessness test. So it didn't matter about the subjective intent of the potential infringer, all it mattered was objectively what a reasonable person would consider to have been reckless and reckless or reasonable. If they were in that potential infringers, shoes, it also really didn't matter what was happening at the time of infringement if they could put together a reasonable case of reasonableness at the time of trial. 2016 is all changed again. And this created a bigger hurdle for startups more cost more obligations, and that's because the law changed back to or changed to subjective intent of the infringer. So each case for willfulness will actually look at the actual intent, the subjective intent of the infringer, whether they have knowledge and all of this is looked at at the time of infringement not later. So it needs to be something that's considered by startups up front rather doesn't address later on if if there is awareness of a relevant patent steps need to be taken right up front. And that's what this, this new case from 2016 told us, again, creating a higher hurdle. So what's the best approach the as soon as you come across a patent that is potentially relevant, seek counsel and create evidence of good intent. And I don't mean make it up. I mean, create, take steps, written steps,

Unknown Speaker  25:34  
trackable steps to create create the to send the message that you had good intent and took all the reasonable steps necessary to try and avoid infringement and avoid avoid willfulness. And opinion of counsel is, of course, one of those types of steps, we're gonna get into some others as well. There's no requirement for an opinion in Halo, but given that this is one of the key ways in which a startup can control the the messaging and control their actions to indicate good intent, opinion can be very important. All right. We're now going to get into some case law posts 2016. So we now have this new test of subjective intent. How have the courts looked at this since then, I do want to back up one slide and point out a couple slides. The focus has been on the egregious conduct, so subjective intent and knowledge at the time of infringement. So it's really about knowledge, plus egregious contact content, docked conduct, excuse me, to indicate that subjective intent. Okay. So in that context, it's got to be more what we found in the case law, that it's typically more than just knowledge of the patent and continued infringement. There is, again, this sort of search for egregious conduct. And most of these cases, cases, there was egregious conduct in order to find willfulness. In this first case from California, there was evidence of copying, and the defendant had previously filed an inter parties review, which is an action to try and invalidate the patent. So they not only were aware of the patent, but clearly they considered it to be relevant because they tried to invalidate it. But they continued to infringe. And that was deemed to be willfulness. Right. The second case from Texas. It was actually the owner of the patent already licensed all of the rights to a licensee, and they ultimately tried to renegotiate to get some rights back. So they could commercialize. They were actually then commercializing and were infringing their own patent for which they've given up all of the rights and that was deemed to be willfulness because they clearly recognize they needed to get the rights to the patent in order to proceed. Other ones inference of copying and failure to investigate or even notify their employees of the presence or the existence of this patent of concern, so they were aware of the patent. There's an inference here that they had copied. And they also didn't tell their engineers about the concern about infringement after there was an allegation received from the pack T. willfulness was found there. Here's a case where no Wilson willfulness was found there was only knowledge and potential assertions of copyright. And part of the reason why that was deemed to be not an issue, I suppose, because they didn't establish there was actually copying. And also, the court determined that they were behaving in a manner consistent with industry with that industry. All right, so more egregious behavior. There was a defendant who rejected a license offer, but continued to copy and continue to infringe. There was also an attempt to license and in for another case in Illinois, and then also in conjunction with that they did seek an opinion, but they withheld information from from their counsel for purposes of generation of that opinion. So that was deemed to be egregious enough to find willfulness.

Unknown Speaker  29:06  
Shawn, let me jump in. The question about case law you just ran through? Absolutely. The citations are all very recent. They're all from last year from 2020. Is it? And the courts been showing an increased interest in these cases, has the halo case made them think of an impact or is this just businesses normal for infringement? I mean, those of us who weren't patent attorneys?

Unknown Speaker  29:28  
That's a good question. I would say this is business as normal with maybe a few more assertions of willfulness given this new sort of standard. And with the ability to point to the point to the time of the infringement. It's more difficult for an infringer, if they weren't taking appropriate steps at the beginning. They can now like they could under the previous test, create an opinion at the last minute and this is a critical point, John, so I'm glad you raised Did under the previous law before 2013, you could do an opinion just before trial. And if the opinion was reasonable under the objective, reasonable Tet reasonableness test, you could potentially avoid willfulness right before trial. Now, if you haven't done it at the time of the infringement, it's not going to be relevant. What's going to be relevant is your subjective intent way back when the infringement started and continued. So you're seeing more of potentially more cases right now, because it's suddenly an easier argument to be made. It's an easier test for the patent T to assert willfulness in these cases. Thanks. Yep. All right. So one, one thing you want to be you might want to be asking yourselves at this point is well, if this is all about awareness to start off with, if it's about knowledge, then how about if I just don't pay attention to to any third party patents? Well, there's two reasons why that's a terrible idea. Number one, again, the investors which we've already covered, investors are going to want to know about freedom to operate and knowledge of the third party PACs. That's the first. The second thing is the courts have addressed that. And willful blindness, A is not a way to avoid knowledge and therefore willfulness. In fact, it can be evidence of willfulness. And that's what this case for tonight to 2019 in Texas, conclude. So you can't stick your head in the sand and intentionally avoid awareness of your competitors patents and hope to avoid potential willfulness assertion. Okay, so we do under these circumstances? Well, obviously, freedom to operate is still important. Obviously, investors still want to hear about it. So landscapes, competitive patent analysis, are still recommended, it's still necessary to take these steps in order to raise money for one thing, also to get comfort with the fact that you can commercialize your technology, obviously. And so you have to move forward that so what does that mean, potentially, with the risk that you're going to come across some relevant patents that then raise the bar about the steps you have to take? Right, so becomes a balance? You know, first you are going to do to the startups are going to be interested in the investors are going to be interested in doing the landscape analysis. So have, have your third party patent search done, review the results? And then you're going to have to separate out, okay, which patents are totally irrelevant? Which patents that are potentially relevant? And then get into that list of the potentially relevant patterns and then identify any patterns. That might be red flags. Okay. And then you're going to have to decide from there what to do. Those red flags may trigger an obligation to take appropriate steps so that you can avoid potential willfulness assertions in the future, create concrete evidence of intent to avoid infringement and to avoid willfulness. All right. So, in that context, let's say that you conclude that the only answer is a freedom to operate analysis, a full blown freedom to operate opinion. One, pass all the necessary requirements in front of the court so that your actions seem reasonable. These are the requirements for that. And again, it does increase costs, but there are ways to do this. So choose competent counsel case law is is very explicit about that outside counsel is better than in house counsel, obviously, patent counsel, is far better than non patent counsel, that's that's not the right way to go. Startup, choose counsel experienced with startups, they're going to be more efficient, they're going to understand the obligations that come with this while also understanding the budget consciousness that is necessary. All right. And again, going back to the requirements for the opinion itself, it has to be thorough, it has to consider the totality of the circumstances. And again, consider your subjective intent issue create concrete evidence of intent. Right? Here are some more requirements related to freedom to operate. Anybody who's been had any experience with freedom to operate opinions understand this, but it has to be thorough, it has to hit all of the check all the appropriate boxes, okay. It needs to take place. Now. One of the things that's going on here, and we've mentioned this already, now, the analysis occur prior to the infringing activity under the new tech from 2016. You need to have competent counsel understands that you need to analyze both direct infringement and infringement under the doctrine of equivalents. You have to have an analysis that reviews the prosecution history and the prior art. These are all specific requirements listed from specific cases over The years these are older cases, but this still all applies. Discussion of case law in the analysis shows awareness and understanding of the law. So that can be important, again adding additional cost to the freedom to operate. So how do you try and reduce costs as a starting point in oral opinion can be sufficient case, there are ports that have deemed oral opinions to be sufficient, so long as you check all of these other boxes. So the oral opinion speaking as a as an attorney, and all attorneys understand this, once you have to actually put pen to paper so to speak, those opinions become much more expensive when you have to put a noose in writing. If you can create something more verbal based maybe with a PowerPoint, that can be a much more cost effective way to approach this. So best practices, use a search firm, don't skimp on that part. If you're going to your startup's are going to want to work with a good patent attorney. And either a good search firm or the patent attorney works with a good search firm to perform your third party search. And again, rank your patents based on relevance, cut out the irrelevant patents, separate the remaining patents, identify the most relevant, and then have a conversation about do any of these trigger an obligation to take further steps to avoid willfulness in the fruit future. All right. draft a summary document with analysis highlights, you may want to consider Zoom is a beautiful thing for this because these are the type of analyses I've been doing in the past. And so now zoom has made it much easier to provide a document with the analysis that checks all the boxes, also doesn't create anything in writing, and reduces the amount of time and therefore the expense associated with the analysis. And this all covers the landscape part and potentially the full opinion part as well. And then you can make decisions, the startup can make decisions, and the tech transfer office can be aware of whether full opinions are necessary at that. I'll turn it over to Mr. Christie.

Unknown Speaker  37:12  
Alright, Sean, thank you. That was a that was fantastic and very helpful and shows where it is. So you know, I will do the remainder of this presentation before we get to your questions from the perspective of the tech transfer office as the licensor to startups. And let me just lay a few sort of assumptions down there before we get going. Most of the startups that we license and in conversations with colleagues at peer institutions they do, they don't come from nowhere or the outside world most of the time, but 80 to 90% of startups for most universities start with students, grad students, postdocs who are already in the lab, the technology is being developed in occasionally even a faculty member who maybe didn't get tenure and decided to try something different. So we have known them well before the license was considered. And we and again, most tech transfer offices now devote a lot of time to education of our students and faculty on on IP issues and other other matters. So we try to we all have this into our educational process, which I think is probably going to be where I end up after I go through these slides. But we're trying to educate them on how to deal with IP on how to deal with potential investors, and how to negotiate a good license with good terms that will enable them to move forward as a business. So when it gets to this point of an FTO, we have a very special quandary. But these are basically what we're gonna look at, is it appropriate for the tech transfer office to look at freedom to operate? As part of your licensing process? And you know, suppose the answer there is no, well, there we are. And the reason why it's no and I'm really firm on that, as well I splurge on the capital letters, the tech transfer office should not perform the free to operate analysis because under no circumstances is it a new realm of expertise. There are plenty of tech transfer offices that have patent attorneys and patent agents in house on staff. But even so, that should not be what you're doing because of those lines in every single license about there is no warranty of merchantability fitness for a given purpose. etc. If you as the tech transfer office provide freedom to operate, you are possibly telling them there is a warranty of merchantability you are invalidating that as is clause in your license. And you need to explain and I've been asked many many times by potential licensed leads us we go, that they want to see our freedom to operate analysis. And when I tell them, we don't have one, they say, Well, why don't you just jump right on that and get us one. And I say, No, maybe not in capital letters inventoriable licensing process, trying to be nice. But, you know, I just told them, This is a cost of doing business for the licensee. This is work, and they need to do for a number of reasons. And one of them, which is one of my broader points here is that in our IP education, we tell them that once you start getting a startup or technology into development, your IP review is not not static, you don't do it once and then walk away from it, you can even come back to it again and again, and revisit it lather, rinse, repeat, there's nothing on that bottle of shampoo that says when you stop, you lather, rinse, repeat forever, you know, every so often, you need to go back, check what's going on in the literature and in the patent realm. And what's in process at your competitors, you know, your IP strategy should be revisited regularly. And therefore social your freedom to operate in the tech transfer office doesn't have the resources to do that. But each startup should and if they can't, then they've got a resource issue that they need to address. So that's, you know, I'm gonna say no to the tech transform net to analysis muda or John?

Unknown Speaker  41:19  
Yep, yep. Thank you.

Unknown Speaker  41:22  
You know, if you really like to start up, and you really, really, really want to help them out with getting them started in the ftu analysis, can you do it anyway? No. And if you really don't like my answer there, and it's going to be it's going to be consistent, you know, go to your general counsel, though, your risk management team, tell them what you proposed, this is going to be something your office is going to be doing on a regular basis? And then they'll tell you no, it's just it's just a risk the university shouldn't be taking on, you should you should pass this off to your prospective licensee, they know the technology better than you. As this goes forward. They know the competition. And they know they know the landscape that they're working within and their needs. Then can you license without doing that analysis? Can you do this in good faith? And so yes, we think that it is good. Well, you know, going all the way back to Shawn's stent example, which is, which is remarkably clear illustration, you know, we can tell them that the IP looks good, we've done enough to understand that the IP is okay. Is there an issue along the way with freedom to operate? Maybe? And if we've found it, we will certainly provide it to them. But without an attached analysis. It helps us to understand as the licensor why they need the analysis. And that's everything that Shawn went through that it is, it is at the top of the list for potential investors to ask, they ask, how does the IP look overall? And when you invariably say, terrific, they say, great, and what about freedom to operate? You know, it's just in the top two or three questions, any qualified high tech investor is going to ask. So the startup really needs. That's true, but you can't give it to them. And we've gone over that. Keep an eye on the questions here in case anybody says to repeat the word no, no, when we use it so far. But there are things you can do. It's not just a It's not just a flat No. As already discussed, you're educating them on what constitutes good intellectual property, what constitutes a good patent, as opposed to the other kinds of which there are out there plenty. How to do competitive analysis, what the value of that is, and obviously then what freedom to operate means. We've had startups go to business plan competitions, and come back seeing a direct competitor, they never knew about who was available, they could have found what they've done research, right. So it's a it's a live and learn situation for the for the startups, but they're the most keenly interested in involved in on top of it. What we can do, and we do regularly as part of our early work while we're working on the provisional patent application, or converting to a non provisional before licensing is, you know, we do search. We keep records of our searches and our search strategy, we can make those available to the prospective licensee to say here's, here's where we looked, here's the dirt we turned over getting here. We keep files, no look at the publications, we just keep it all together, and it's perfectly fine to share these with the licensee. That's not risking any liability on your part. And then we have had a technology where when the inventor disclosed it and he and I sat down to do the inventor interview initially, and we were walking through it and it was something as a technology that clearly had a market value, something that can be made into a product. He at the end of our talk, he said well, but there's a problem. I used a building block to get to my invention and that building block here And from having worked with this other inventors, a postdoc, I think, that's patented and licensed to a company, and they're developing it for other purposes altogether. And I said, Well, that doesn't stop us, we just have to go talk to the other company. So he was it was a classic freedom to operate issue. We didn't have it if we went forward as is. But we filed a provisional application and immediately began talking to the, to the company and now they've got a whole suite of products on the market based upon my faculty members invention, based upon their inventions. So remember that a lot of people who hold patents are in the patent business for $1. And if there is $1, there somewhere, working together in a collaboration, you have a license agreement with this company, a partnership, a collaboration or just a straight in license for yourself. There are lots of ways to get around this without ending up in federal court. And then here's the point that I think Shawn and I have discussed. But if you use your outside counsel, if you use the search firm, you know, you can make them available to the licensee as well. I think we're going to revisit one of those points in a minute. But you can always again, just, you know, show show your potential licensee your startup, everything that you've done along the way to get to the point where you think you have something patentable and let them use that for their freedom to operate analysis. You can cooperate with them, you just can't verify any results. All right. There we go. Thanks, Shawn. So here's here's where things can go horribly wrong. I always like to have a slide this is where things can go horribly wrong. Otherwise, it's no fun. But you know, if if the tech transfer offices, if tech transfer office isn't transparent, if they don't show everything they've learned along the way of the IP, or if unfortunately, they revealed they didn't do much homework on the way to getting this IP file, you will lose potential licensees there, they they get it right away that something isn't, isn't right. So while you need to be straightforward, notice that you cannot provide the freedom to operate analysis, you also need to do everything that I've previously outlined, I'm making it very clear what you do know about it, and what the startup can do with the information you can share with them. And then obviously, the pitfall of if you do cave is really want to do that FTO analysis, you could be exposing your institution litigation. And that's, that's a real minimum of fun at that point. So do not ever warrant that your IP is good for anything. Quite the opposite. It's it's a business risk for them, they don't want to take it fair enough. On the other end of the licensee, dives into this IP without doing sufficient background work themselves. And an awful lot of licensing officers, including myself has been here where at some point, the IP doesn't hold up for something you may not have known at the time of the license, but still it is it sours a relationship. If if your licensee of any nature, whether or not that's money and time into it never scarce resources to discover that for some reason, the IP has not worked. So that's a real risk for them. So whatever you can do to lower that risk for the licensee do within reason. And then to Shawn's early point, you can do an FTO analysis forever. But you need to figure out where that that point of diminishing returns is, what's a reasonable amount of analysis? And when should they stop doing that and just focus on moving technology forward and figures that they will improve and changes as they go along? And how to address the FTO issue. So there's risks on both sides if we don't do this, right, certainly. And then, yeah, I think we've got the conclusion slide, Shawn, whatever, whatever metric

Unknown Speaker  49:02  
I got. I got a question first. Have you run into any any situations with a licensee where they didn't want to spend the money for some sort of competitive landscape analysis, some sort of freedom to operate analysis of their third party patents? Has that been? Is that ever an issue on any level with respect to any of your licensees?

Unknown Speaker  49:28  
Yes, it is. And I think so a lot of the issues we have with startups, especially those that you know, involves somebody just coming straight out of the lab is they've never done it before. And they don't understand what's involved. And they didn't pay attention when we tried to educate them. So really, when they find out what it costs they don't want to do it and think we should do it for them. So that's when it becomes a bit of an unpleasant conversation to stick with your with your no but but you have to stick with it and and instruct them to get get more advice, right. I mean, you tell them to go talk too, we can sometimes ask a friendly attorney if they can spare 20 or 30 minutes pro bono to talk with our startup about a few points. And then And then, you know, convince them that really, as you put it, on your slide with regard to search firms don't skimp right. I mean, you can, again, another issue with patent attorneys, you could spend as much as you have. But you know, you find a good one, and it's worth what you spend. So getting that issue across to a student based startup with, you know, no cash in the bank, whatever, no plans for cash in the bank, but they need to start spending some cash that they don't have. That's a hard conversation, but we have it which point it

Unknown Speaker  50:42  
is. It's, it's the original, the origins of this presentation are that I've run into some situations where someone thought that it was too dangerous to do a landscape analysis, because you might come up with a patent, that would create issues with freedom to operate, for which there isn't enough budget to actually do it. And so that's where this comes this actually this presentation, this idea for this topic actually originated that because I think there's a lot of schools of thought out there, especially since the case law changed. And if they have some awareness of this new sort of tougher hurdle, I think then there's more reluctance to actually make themselves aware of the competitive patents. But I think from a fundraising standpoint, I think from a, you know, actually talking to investor standpoint, I think that that's just a non starter as a solution. So I don't know, run into anything like that, or no,

Unknown Speaker  51:45  
yeah, no. And that's another thing we try to advise startups on is if they can devote themselves, okay, so first off your scenario is that they were sort of going for the willful blindness thing, right, and it doesn't work anymore. You need to be able to tell them why that's wrong. And thanks for your thanks for your analysis and pointing out the case of all we can tell them that willful blindness is no excuse. But the other thing regarding potential investors is, you know, startups will ask a lot of questions like, should I? Should I go ahead and make my, you know, make us into a C Corp, right? And my usual answer is until they're funded, keep it as simple as possible, right stay as an LLC at the state level. And when somebody comes in, wants to invest in you, and they want to put their money into a REIT seasons, certainly biotech investors, they know that they've got to spend the money, they will tell you what form they want you to be in for corporations, and they will want to use their trusted IP attorneys. Yep. So the startup should, as I recommend for the to the startup should be keeping their records of everything they've done to make sure their IP is okay. And then when the time comes, just shift the roles here. So here's how to do in forms of startup, here's how the startup informs their investors IP team, because all the investors have their own IP attorneys that they trust that they've been working with for years. And they will say, Look, we're gonna do the FTO analysis on this. Why don't you meet with our attorneys and tell them what, you know, get us started, but they're going to have their team do it right. They're not going to if the transfer office had done the FTO. Now, here's another reason not to do it. They wouldn't they wouldn't fly on, and they should not arrive for days. That's

Unknown Speaker  53:28  
a that's a critical point. I usually have that in my in my my basic FTO slides. That's a critical point. That's one of the first conversations that I have with my startup clients is they say, well, we need to we know we need to do a preliminary FTO analysis, or I tell them, they need to do a preliminary FTO analysis. And then in the end, they say, Well, how much is that going to cost? And my response is, we'll make it very reasonable. Because we're just here to identify red flags, the investors are going to want to do their own FTO. So let's not waste our money. Digging too deeply. Let's see if there's anything of significant concern. And that's where our starting point is. And then you can decide whether you want to design around or if you want to wait for an investor potentially do a more in depth FTO, but no sense in spending a bunch of money up front when the investors as you said, are going to use their own counsel to do their own analysis. So it's a very good

Unknown Speaker  54:24  
yeah, and another point, you know, that the startups can can do on the on the do it yourself side. You know, search firms aren't expensive. As things go. And we have found, you know, we've tried this test where we sent the same technology to multiple search firms and gotten very different reports. So you know, hire two, it'll cost you maybe $2,000 At the most, get to search reports and get the smart person on the smart team startup team to read them and look at claims etc. You can do some of this on your own without spending a lot of money but again, looks like proper due diligence. to the to the potential investment.

Unknown Speaker  55:03  
Good. Excellent. All right. Our conclusion slide. I don't the if I'm I'm sharing my screen. So I don't have the full screen here. But it doesn't look like we have any questions here. Am I missing anything?

Unknown Speaker  55:19  
I'm keeping an eye on it. We're good.

Unknown Speaker  55:21  
Thank you. So they're

Unknown Speaker  55:23  
just, I'm just absorbing all and learning it all and

Unknown Speaker  55:26  
no, no, it's good. So number one, don't stick your head in the sand, the startups cannot stick their head in the sand. And, you know, as a tech transfer office, you know, you want to avoid working with a licensee who's trying to stick their head in the sand, both patent protection and freedom to operate are critical. Keep in mind, you know, sort of the best practices that we discussed, and then be prepared to pay for the complete FTO analysis or be prepared to have an investor pay for the complete FTO analysis when you reach that point. You know, if you identify a particularly relevant patent up front, maybe you're going to have more of a hurdle with the investors. But you know that that would be a point at which you may want to talk about, you know, trying to work around or come up with your own FTO opinion, potentially. But that's, that's another sort of wrinkle in the situation. So, John, I'll let you second part. Yeah,

Unknown Speaker  56:25  
no, my first bullet is there. No, you're no, don't don't, don't do this. You can do research around it and share it with your startups. But but don't give them anything that you call a landscape analysis or a freedom to operate analysis. But do be aware of why they need all this, what's what's good and useful to the startup as they go forward and look for, for funding. And, you know, they're their goal is to move your university's technology forward. So, you know, you can help them up to a point but know where that point is. And, again, your general counsel would rather talk to you about this now than when something goes wrong. So, you know, find a way to have that conversation internally if need be on where your limits are and what your general counsel is comfortable with. But there is a you know, they have a real need. And you have a real need to protect your institution from litigation. And you can provide all the information you have for them on again, an as is basis. And that includes one of my first points education on on what constitutes good intellectual property, and what freedom to operate means. So that those are all things you can you can do with your startups to do everything that's within your range of movement. But it's helpful to them, and point them in the right direction.

Unknown Speaker  57:47  
Excellent. John, thanks so much for joining me for this and walking through this with me, I appreciate it. Like I said, this is kind of a oh, do have a question. John, you you're

Unknown Speaker  57:56  
on, just popped up. Okay, so if a startup doesn't have a provisional patent application, but it's formed a startup for over two years, and has since left the university, what are the PTO rights and how can they work with startup? In this case, the invention was derived while at the university. Okay. That is an interesting question, Shawn, if you don't mind, I'll take the first one. That sounds like your question. Yeah. So if it's been more than two years, since the the invention was derived, you know, the first question is, is there anything there? That's, that is still patentable? Have they gone out and shown it to the public? Have they disclosed it? And you're going to have to do you know, some digging into what the what the facts of the situation? Are? Does the university have any rights? Was it from funded research at the university, etc. If we'll take one scenario here, where it was derived from funded research done while at the university, then yes, the university would have ownership rights in the tech transfer office should take steps to secure them. You want to be careful here of I think for a lot of universities there they're very cautious about appearing grabby, right if there's been some period of time has passed. If it's students making the student based work, then they want to be careful of not looking like universities in it for greed. I mean, you need to start a conversation with the startup, see where they want to go see how the university can help them and determine ownership of the of the IP so I would say you want to go at this collaboratively with the startup especially if they've they've left campus and you don't have don't have a stick to hit him with you gotta go carry you got to talk to them about what their options are, how the university could help them. And then it's in their best interest to determine ownership because it's it's not part of this presentation. But it's another issue if former university students or faculty run around with IP again, savvy investors are going to ask them loans it and if they can't show a clear trail of ownership over the university waived ownership, etcetera. They're going to, you know, seasoned investors won't have anything to do with them if they can't really demonstrate the provenance of their of their IP. Got anything to add to that?

Unknown Speaker  1:00:15  
No, no, I think you covered it. Well, I think, obviously, I mean, the simple answer is check the inventor ship, and who was tied into it and who they were working with, etc. And see if there's an inventor ship issue that might create ownership, or, you know, some rights to it. But But beyond that, that was the other thing that popped into my head. Was there another question there?

Unknown Speaker  1:00:42  
No, not for us. There was one for Sammy about the slides. Let me see one, Shawn. As as you know, supposing I'm in a tech transfer office, and I'm a chronic recidivist filer of, of patent applications, and then I tend to license them as they do. And this is hypothetical, I'm curious, I'm I'm all better now. But. But if I and I use, say, your firm, then use our attorney to file a patent application. And then I had a startup who was asking us questions about FTO. And I said, Go find good counsel. You know, there's not going to be anybody who knows the technology from a from a patent and IP point of view better than the attorney who worked on it. But if I recommend they go talk to you, does that create a conflict for you and your firm? Or is that something you can manage? I mean, how do I how do I help them without putting them into a situation where they're conflicting you? Or you have to tell them? No, I mean, how do we solve that? Yep.

Unknown Speaker  1:01:44  
That's a great question. The, the fact is up to you, right? If you're bringing them to me, then the question comes, are you your entity is your transfer office comfortable with me, my firm doing the FTO, for your licensee in that situation, if it were patent prosecution, and they were asking us to file additional applications for them, then you've got a potential subject matter conflict issue, because it would obviously be the same subject matter or very similar to what your university owns and license to them. So from a prosecution standpoint, that probably would be a conflict that might not even be probably isn't waivable. Unless we were to seal it off in another area of the firm. And you'd have to approve that, as well. Technically, it's not actually an ethical conflict. I don't think in most cases for us to do a freedom to operate for your last place, and Z. Assuming that no conflict arises later on that might involve some of the work that we did. However, like I said, it's up to you. So in those situations, and I've had situations like this with some of my university clients in the past, it's entirely up to the university. And we typically, even when we have confirmed that it's not a technically ethical conflict, we typically get a waiver letter in place. We have both parties sign it. And then we have some statement that if some conflict arises, that we will immediately we won't be involved in that conflict represent either party in conflict, and we will likely stop representing the licensee in order to preserve the relationship with the university. And we've certainly done that in the past. So very much depends on the comfort level of the tech transfer office of the university in those situations.

Unknown Speaker  1:03:46  
Right, thanks.

Unknown Speaker  1:03:46  
Yep. All right. I think we're good. I think we're done with q&a as well. And if there's any other questions, thanks again, John, for joining us. And thanks, Sammy, for setting this up for us.

Unknown Speaker  1:03:57  
Absolutely. Thanks, Shawn. Thanks, Sammy.

Unknown Speaker  1:04:00  
Thank you both for such an informative discussion. I think, John, we all know that the big takeaway of the day is just the word no. Easy learning objective there. And thank you to all of our attendees for joining today. As a reminder, a recording of the webinar and a copy of the slides as a handout will be available for viewing in the autumn Learning Center within a few days of the event and it's included in your registration fee, and all details for claiming credit for CLE are in the Learning Center as well.

Transcribed by https://otter.ai