“Platform to Business” Draft Regulation Announced

In a press release published on February 14th, 2019, the European Commission announced, as part of the Digital Single Market strategy, a draft regulation aimed at creating a fair, transparent and predictable business environment for businesses and traders when using online platforms. The new rules are underpinned by an impact assessment that incorporates evidence and stakeholders’ views collected during a two-year fact-finding exercise.

Purpose

The regulation is a “regulatory attempt to establish a fair, trusted and innovation-driven ecosystem in the online platform economy and will contribute to a more innovative and competitive EU Digital Single Market…”.

The regulation will be directly applicable, preventing Member States from setting additional rules in the areas explicitly covered by the new rules. Continue Reading

Preparing for IP Diligence: Ensuring Proper Inventorship and Ownership of Patents

The best preparation for diligence begins well in advance of any discussions with companies interested in investing in or purchasing assets of the innovating company. Ideally, the innovating company should implement policies and practices from day one of the company to help avoid problems that will inexorably come to light under the scrutiny of diligence. Inventorship, the starting place for chain of title on patents, and ownership are fundamental to any deal, and can cause havoc when a company gets it wrong.

Inventorship

The share of U.S. granted patents naming more than one inventor continues to grow, with more than 20% of all patents granted in 2016 naming four or more inventors.[1]  More inventors means potentially more inventorship and ownership issues to confirm, clarify, and correct in preparation for diligence.

The innovating company whose technology is to be scrutinized should put in place policies that describe the inventorship determination process. Having an inventorship determination process that is open, inclusive, and fair can prevent issues with disgruntled employees who are terminated after the deal is complete. See our related blog for suggestions for making the process fair and open. Any issues identified in the process should be confronted within the organization quickly and effectively.

This determination process should include a review of contributions of employees of the innovating company, as well as the contributions of any others who may have participated in the inventive process. For example, special issues arise when the innovating company in-licenses technology from or collaborates with universities, or uses contract research organizations (CROs). These relationships should be investigated fully to identify any inventions arising outside of the innovating company.

  • Tip for Investing Companies: During diligence, an investing company should assess the innovating company’s policies for determining inventorship and determine whether the process on its face appears comprehensive and fair. Investing companies should also ask whether there are any known inventorship issues and what, if anything, has been done in order to resolve them.

Ownership

Inventorship is a key driver for patent ownership since it is the starting point for chain of title. An innovating company should review its employment agreement(s) for a present assignment clause – “I hereby assign” rather than “I agree to assign” or “I promise to assign.” It should also be confirmed that every employee has executed an employment agreement with an assignment clause.

Standard procedure should include obtaining executed assignments for each invention as close as possible in time to the patent application filing, i.e. when the inventors are more likely to be accessible and cooperative. Where this is not possible, the employment agreement can serve as evidence of assignment.

While these procedures may seem like givens, it is not uncommon for missing assignments and/or employment agreements to come to light in diligence.

  • Tip for Investing Companies: During diligence, an investing company should search public records for recorded assignments and review the content of the assignment documents to determine whether title has effectively passed to the innovating company. Investing companies should be wary where assignment documents are not publicly available, and should request that any unrecorded assignments be made accessible in diligence.

An innovating company should also review its collaboration agreements, to understand to whom each inventor is obligated to assign. Investigation beyond these agreements may also be needed.

In one common scenario, a university researcher hired to consult may execute an agreement with the company, with or without the university’s knowledge, purporting to assign their inventions to the company. Savvy universities, however, include assignment clauses in their employment agreements and in their IP policies that obligate their researchers to assign to the university.

In another common scenario, companies, particularly in the life sciences, use CROs for research which can lead to a CRO employee being an inventor on the innovating company’s patents. Agreements with CROs typically provide for the innovating company to be assigned ownership of CRO employee’s invention.

In both scenarios, and generally, care should be taken in how and in what order the assignments are executed. Where a third party inventor is obligated, by employment agreement or policy, to assign to her CRO- or university-employer, she should not assign directly to the innovating company. To ensure proper chain of title, the third party inventor should assign to her employer first, and her employer should assign to the innovating company second.

While this may seem self-evident, surprisingly, it is not uncommon to see assignments executed out of order with the result that the transfer to the innovating company is not effective. Unraveling and correcting this will be costly and may be difficult or even impossible to do.

  • Tip for Investing Companies: During diligence, the investing company should ask the innovating company to disclose whether there are any third party inventors; and in the case of a university researcher, whether the university has been made aware of the university employee’s consulting agreement with the innovating company and has agreed to the assignment obligations. Investing companies should keep in mind that once an asset is acquired, inventorship and ownership issues will become its issues.

Conclusion

Proper naming of inventors is critical for maintaining patent rights, as inventors are the first owners of the patent. Proper assignments thereafter are also necessary to ensure ownership transfers. Addressing inventorship and ownership issues early will help to ensure that diligence proceeds smoothly and the deal gets done.

[1] Office of the Chief Economist, IP Data Highlights, No. 2, February 2019.

China Trademark Office Attempts to Curb Bad Faith Filings

Paolo Beconcini authored a piece looking at the China Trademark Office’s draft regulation, titled “Several Provisions on Regulating the Application for Registration of Trademarks,” that is now open for public comment. Beconcini wrote that this draft is the first attempt at providing a vetting system to spot and reject fraudulent trademark applications by malicious squatters and punishing bad actors and their trademark agents for such activity.

New Artificial Intelligence Advisory Body in England and Wales – Bringing the Modern World to the Judiciary

Lord Burnett of Maldon, the current Lord Chief Justice, has set up a new Advisory Body with the aim of ensuring that the Judiciary of England and Wales is fully informed about developments in artificial intelligence (AI).

In setting up the group, Lord Burnett recognised the importance of AI in today’s modern world, and the potential impact of AI on the work of the courts.

Professor Richard Susskind, President of the Society for Computers & Law, has been named chair of the body, and in a recent interview stated that AI has taken off in the last six or seven years, to the point where it has become “affordable and practical”. Professor Susskind believes that the new group will start a dialogue among the judiciary about “one of the most influential technologies that there is”, and recognises the importance of judges being open to the opportunities that AI technology could offer to the court system (with “practical tasks” cited as an example).

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Adverts must avoid harmful gender stereotypes

In late 2018, the Committees of Advertising Practice (CAP and BCAP) announced the introduction of a new rule to deal with the depiction of harmful gender stereotypes in advertising.

The new rule will apply to both the broadcast and non-broadcast codes of advertising practice and come into force on 14 June 2019, stating that advertising “must not include gender stereotypes that are likely to cause harm, or serious or widespread offence”.

The introduction of the rule (as rule 4.9 in the CAP Code, and rule 4.19 in the BCAP Code), which is supported by additional guidance, follows a public consultation and the 2017 review of gender stereotypes in advertising by the Advertising Standards Authority (ASA) which considered the effect that adverts may have in emphasising such stereotypes.

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Theranos and the “Broken” Patent System

ArsTechnica published an excellent piece on how the United States’ “broken” patent system permitted Theranos to obtain hundreds of patents for technology that did not work and did not meet the “enablement” requirement of 35 U.S.C. section 112.  According to author Daniel Nazer, the USPTO did virtually nothing to ensure that Theranos’ technology had been reduced to practice or that its disclosures would enable others to use the technology.  Based on the strength of its patent portolio, Theranos was able to solicit hundreds of millions in investments from venture capitalists and patent enforcement entities. Continue Reading

Cryptoassets: Out Of The Shadows

Cryptoassets are coming out of the shadows. Slowly but surely. Over the past decade or so, perhaps principally driven by huge gains (and losses) in the value of Bitcoin, there has been a palpable dawning recognition that cryptoassets, and the distributed ledger technologies (DLT) that underpin and encrypt them (such as Blockchain), are here to stay. Mainstream financial services are testing (and increasingly grappling to control) the investment market. At the same time, the rapid digitalisation of the global economy is suggesting new and potentially exciting applications for DLT across multiple sectors (including, for random example, in tax administration, collection and compliance).

As interest, and adoption, has grown, regulators have (necessarily) started to take a closer interest. They have been concerned most by the risks cryptoassets pose to consumers, and the integrity of the financial markets, that arise from the very characteristic that has made them so attractive: the decentralised, encrypted, nature of DLT. Determined to maintain its position as one of the world’s leading financial centres, the UK has dramatically stepped up its efforts over the past year. In March 2018, the Chancellor of the Exchequer established a ‘Cryptoassets Taskforce’, comprising the three cornerstone organisations of UK fiscal and monetary policy (HM Treasury, the Financial Conduct Authority (FCA) and the Bank of England) to formulate the UK’s policy and regulatory for cryptoassets and DLT.

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Supreme Court Clarifies That, Yes, You Have to Register Your Copyright, and No, You Cannot Recover Your Expert Witness Fees in Copyright Cases

In a pair of unanimous rulings on March 4, 2019, the Supreme Court clarified (1) that the U.S. Copyright Office must issue a registration certificate before a plaintiff can commence suit and (2) that a prevailing plaintiff cannot recover fees for expert witnesses, jury consultants or other “costs” that are not specifically called for in the relevant statutes. Continue Reading

Faux or Fur?

The Committee of Advertising Practice (“CAP”) recently drew attention to a number of misleading “faux fur” claims in relation to certain clothes and accessories in its enforcement notice published on 17 January 2019.

The notice records CAP’s concern that consumers have been misled by ads for “faux fur” products, in contravention of Section 3 of the UK Code of Non-Broadcast Advertising and Direct & Promotional Marketing (“CAP Code“). The enforcement notice informed offending retailers that CAP’s compliance team would take targeted enforcement action from 11 February 2019 if misleading ads continue to be used.

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