due diligence (close)
Investigations undertaken to assess the ownership and scope of one or more IP rights that are being sold, licensed or used as collateral in a transaction. This is done in order to identify business and legal risks associated with the IP rights being analyzed.
intellectual property (IP) (close)
Creative ideas and expressions of the human mind that have commercial value and are entitled to the legal protection of a property right. The major legal mechanisms for protecting intellectual property are copyrights, patents, and trademarks. IP rights enable owners to select who may access and use their intellectual property and to protect it from unauthorized use.
A grant of permission to use an IP right within a defined time, context, market line, or territory. There are important distinctions between exclusive licenses and nonexclusive licenses. An exclusive license is “exclusive” as to a defined scope, that is, the license might not be the only license granted for a particular IP asset, as there might be many possible fields and scopes of use that can also be subject to exclusive licensing. In giving an exclusive license, the licensor promises that he or she will not grant other licenses of the same rights within the same scope or field covered by the exclusive license. The owner of IP rights may also grant any number of nonexclusive licenses covering rights within a defined scope. A patent license is a transfer of rights that does not amount to an assignment of the patent. A trademark or service mark can be validly licensed only if the licensor controls the nature and quality of the goods or services sold by the licensee under the licensed mark. Under copyright law, an exclusive licensee is the owner of a particular right of copyright, and he or she may sue for infringement of the licensed right. There is never more than a single copyright in a work regardless of the owner’s exclusive license of various rights to different persons.
patent (U.S.) (close)
A grant by the federal government to an inventor of the right to exclude others from making, using, or selling his or her invention. There are three kinds of patents in the United States: a standard utility patent on the functional aspects of products and processes; a design patent on the ornamental design of useful objects; and a plant patent on a new variety of a living plant. Patents do not protect ideas, only structures and methods that apply technological concepts. Each type of patent confers the right to exclude others from a precisely defined scope of technology, industrial design, or plant variety. In return for the right to exclude, an inventor must fully disclose the details of the invention to the public so that others can understand it and use it to further develop the technology. Once the patent expires, the public is entitled to make and use the invention and is entitled to a full and complete disclosure of how to do so.
Your source for expert commentary on IP management issues.
Vaughan P. 2007. IP Asset Sale Involving an Intra-Uterine Device: Population Council. In Executive Guide to Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (eds. A Krattiger, RT Mahoney, L Nelsen, et al.). MIHR: Oxford, U.K., and PIPRA: Davis, U.S.A. Available online at www.ipHandbook.org.
Editors’ Note: An earlier version of this case study was presented at the MIHR conference Using Intellectual Property for Improved Health in Developing Countries: An Evidence-Based Approach to Good Practice, Bellagio, Italy, June 14–18, 2004.
© 2007. P Vaughan. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.
IP Asset Sale Involving an Intra-Uterine Device: Population Council
The Population Council, a nonprofit, nongovernmental, international research organization that focuses on reproductive health, was faced with patent expiration on its intra-uterine device (IUD). The Council wanted to continue the product’s availability while maintaining growth of the public and private sector markets and providing a reasonable financial return. Intellectual property (IP) relating to the IUD included patents and the regulatory dossier, known as a new drug application (NDA). By the end of 2002, the IUD patents had expired, but the proprietary information contained in the NDA remained a viable asset.
In deciding on an appropriate IP management strategy for achieving its objectives, the Council decided to “think outside the box” and took innovative steps that included using the services of outside consultants. Also, the Council took a new approach, which was to sell the NDA in a bidding process rather than to grant license rights to the NDA. Because the IUD had been marketed for many years, the Council knew what could be expected in sales revenues and had a good basis from which to estimate a reasonable sale price for the NDA. The Council conducted an IP sale bidding process from which it selected the manufacturer of the IUD as the transferee. The manufacturer was a single-product company that produced 2.5 million IUD units per year and sold 2.3 million of these units annually to the U.S. Agency for International Development (USAID) at deep discounts for supply to less-developed countries.
The purchase agreement included annual minimum sales and annual sales growth requirements. It also provided for a guaranteed supply of the product to indigent women in the U.S., free-of-charge through a charitable foundation. Also, selling the dossier to the manufacturer guaranteed that the IUD would continue to be supplied to USAID. Deciding to sell the dossier was a result of the Council thinking strategically about how to handle its NDAs, recognizing that NDAs have traditional and unique values that could be leveraged to meet the Council’s goals.
An interesting aspect of this case study is how intellectual property owned by a nonprofit organization was sold using commercial strategies of IP management (for example engaging the services of outside consultants and selling the asset through a bidding process). Essential was understanding the rights associated with the intellectual property and the business environment in which the Council was operating. In this example, the dossier had a viable role beyond patent expiration and was used to help the organization continue to provide the public with access to a mature product. Creative thinking helped design new frameworks and models through which access could be promoted. Intellectual property does not have to be licensed: it can be sold, assigned, and handled in many different ways depending on the goals of the IP owner.
Types of Agreements
The Population Council entered into an asset purchase agreement with the U.S. manufacturer of the IUD.
IP Rights Decisions and IP Management
The Population Council had to decide to whom ownership of the NDA should be transferred in order to ensure that:
The Council engaged in number of activities important with respect to strategic IP management:
This project implemented the Population Council’s policy to commercialize all Council-developed reproductive health products, so that they could be made available to users in the private and public sectors in developed and developing countries.
External Factors That Affected Decision Making
A number of external considerations affected the Council’s decisions, including:
Lessons Learned and Health-Access Issues
The following items represent key lessons learned through the IP asset sale. The lessons may be applicable with respect to other projects involving intellectual property: