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Monitoring, Enforcement, and Resolving Disputes
Summary and Overview
Krattiger A, RT Mahoney, L Nelsen, JA Thomson, AB Bennett, K Satyanarayana, GD Graff, C Fernandez and SP Kowalski. 2007. 15: Monitoring, Enforcement, and Resolving Disputes. In Executive Guide to Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (Krattiger A, RT Mahoney, L Nelsen et al.). bioDevelopments-International Institute (Ithaca, USA), MIHR (Oxford, UK), PIPRA (Davis, USA), and Oswaldo Cruz Foundation (Fiocruz, Rio de Janeiro, Brazil). Available online at www.ipHandbook.org.
© 2007. A Krattiger et al. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.
Intellectual property is not a static asset. It is dynamic, requiring ongoing attention and management practices that will allow an institution to protect its value and maximize its utilization. Treating intellectual property as such is a fundamental best practice, regardless of whether an institution is public or private, whether located in a developed or developing country or whether its mission is directed toward commercial or public interests. Intellectual property, if it is to be an asset, cannot be simply be shelved and left alone, or even licensed and then left alone. Intellectual assets, with patents, as a particularly cogent example, must constantly be managed, monitored, maintained, and policed as part of a continual “cultivation” of IP rights.
The larger the IP portfolio, the greater the likelihood that disputes of one sort or another will arise. Few disputes end up in litigation, as there are many options and strategies for resolving disputes. Particularly in the context of partnerships between entities in developing and developed countries, litigation would be a complicated, time consuming, expensive, and risk-laden process. As Part 7 on contracts and Part 11 on licensing demonstrated, good contracts and good licensing practices anticipate that disputes arise with partnerships and licenses. But the best way to avoid disputes is to manage agreements in a manner that leads to effective resolution of disputes.
Feindt1 details how the Office of Technology Transfer (OTT) of the National Institutes of Health (NIH) administers its technology licenses. Licensing is an important part of NIH’s operation and an important part of any technology transfer endeavor anywhere. The portfolio of licenses at OTT includes over 1,400 active technology licenses, 750 of which generate about US$100 million in revenues.2 These licenses represent five types of technology licenses:
- Commercial evaluation licenses (also known as options), which enable companies to provisionally evaluate whether a new technology suits their needs
- Patent commercialization licenses, which provide access to rights in patented or patent-pending technology. These licenses can be either:
- Exclusive, providing a single licensee with the right to practice the patent
- Nonexclusive, providing patent rights to, potentially, multiple licensees
- Nonexclusive patent licenses for internal use, which provide access to tools or processes, useful for research purposes
- Biological materials licenses, which provide access to nonpatented biological materials
- Software licenses, which provide access to nonpatented software
Although the above licenses differ as to the types of technology licensed, the specific terms of the license, and the reporting obligations, one aspect remains consistent: every license is written with well-defined financial terms and clearly delineated reporting obligations.
As a licensor, the NIH OTT administers, monitors, and enforces its technology licenses. It accomplishes this by monitoring licensee compliance with royalty payments and reporting obligations throughout the term of the license. Typically this is not a confrontational relationship. Instead, the NIH OTT seeks to build cooperative relationships with its licensees that, in turn, facilitate problem-solving discussions, resolve outstanding issues, and identify possible opportunities for advancing commercialization of products and/or services pursuant to the technology license.
In practical terms, OTT maintains licensee contact lists (people within the licensee organization) as they are important when royalty payments or issues of noncompliance need to be addressed. Such a list, and a certain level of personal rapport, greatly facilitate communication and save much time. Another essential operational procedure is maintenance of a well-organized filing system, possibly with archival, working, and computer files. A computer filing system can be structured as a searchable database for license administration, with integrated interactive modules organizing data on contracts, inventions, patents and license applications, royalties, receipts, and reporting. (Such a database is available for download free of charge from the online version of the Handbook.)3 Many of the best practices listed and discussed by Feindt relate to licensees’ reporting obligations, to amendments to license agreements, and to sanctions for noncompliance. Amendments reflect mutually agreeable changes in the expectations of licensor and licensee that occur with the passage of time and changing circumstances; they might involve term extensions, royalty adjustments, or changes in the field of use. Sanctions, on the other hand, are unilateral actions by the licensor that are triggered by licensee noncompliance (and may include a threat of license termination and even legal action in order to enforce lapsed financial obligations).
A different type of dispute is that of patent infringement. Patent infringement is, at least conceptually, analogous to trespass in that it is an invasion and/or misappropriation of another party’s exclusive property right. Hence, identifying and taking action to remedy infringement is an essential part of IP asset management. There are four main categories of patent infringement:
- Literal infringement, in which each and every element of a patent claim is found in the alleged infringing product or process
- Doctrine of equivalents infringement, in which the alleged infringing product or process is substantially the same as the patented product or process
- Contributory infringement, in which a party contributes to infringement of a patent by selling a component that has no use other than as part of a patented product
- Inducement to infringement, in which a party actively and knowingly aids and abets another who is directly infringing a patent
Maintaining the integrity and value of public sector intellectual property is, as Haeussler4 points out, a strategic process, which will vary somewhat depending on the category of infringement. First, it is important for a patent applicant, public or private, to consider claim structure and scope when drafting and filing patent applications. Unless the claims of a patent are sufficiently broad so as to confer clear economic potential, prospective licensees will be reluctant to enter into commercialization agreements or partnerships. Second, it is important to stay vigilant, establishing surveillance protocols for possible infringement of patents. For example, inventors should be contacted, on a regular basis, and asked if they know of anyone who is, or might be, infringing their patents; in addition, technology transfer staff members should regularly review key media related to the technology in order to watch for potential infringers. Surveillance is not only sound business practice but is essential for maintaining and preserving patent rights. For example, lack of enforcement can lead to a loss of patent rights.5
Patent infringement can also lead to a lawsuit. And litigation is expensive, risky, uncertain and often protracted. With good negotiation, a settlement through modified license terms often can be amicably reached. If litigation becomes inevitable, then a series of questions need to be addressed including whether to use in-house or external counsel, whether to file suit based on patent infringement or breach of contract, and where to file the lawsuit. Importantly, credible communication that the IP owner is serious about protecting its IP assets will go a long way to bringing infringers to the table to discuss the issues and to negotiate. Haeussler concludes that early communication with potential infringers, and good license and licensee diligence, are the foundations for policing and maintaining intellectual property, irrespective of whether the intellectual property is owned by a public or a private entity. Feindt, in his chapter, illustrates the importance of early communication with infringers using examples from NIH.
Due to the costs—and risks—associated with litigation, alternative dispute resolution procedures, such as mediation and arbitration, should under many scenarios be attempted first. These forms of dispute resolution do not work through formal legal systems, but are instead set up by the parties involved. They are established by dispute resolution clauses articulated when a partnership is set up or a license granted—before any problems have arisen. The goal is to have an already agreed-upon system when difficulties arise.
There are several elements unique to arbitration and mediation that can help parties resolve disputes as Min discusses in detail.6 Figure 1 shows the two processes side-by-side. For arbitration, the parties have the power to decide on the number of arbitrators, the type of arbitration (ad hoc or institutional), the place of arbitration, the language of arbitral proceedings, and the applicable substantive law. Unlike judges, whose powers are defined by national laws, an arbitral tribunal’s powers are limited to those conferred by the parties. Mediation involves the same kinds of choices, although unlike a judge or an arbitrator, whose mandate is to issue a binding decision or award, a mediator does not have the power to impose a settlement on the parties. Instead, the mediator serves as a catalyst for party negotiations. The advantages of arbitration and mediation include the following:
- Through arbitration or mediation, the parties can, using a single procedure, resolve disputes involving intellectual property in a number of countries.
- In both arbitration and mediation, parties may resolve a transnational dispute on neutral territory.
- Arbitration and mediation are based on the consent of the parties.
- Parties can select arbitrators or mediators.
- Parties to arbitration or mediation can keep the proceedings and any results confidential.
- The protracted nature of litigation, which pushes parties into multiple rounds of appeals, is a common problem when litigating transnational disputes. The end result of arbitration, however, is a final, binding award.
- The mediator’s role is to broaden dispute resolution options, allowing the parties, with the help of the mediator, to craft innovative, common-sense solutions that (preferably amicably) settle the dispute.
- Mediation involves low risk. If a party feels that it is not making any progress, that the procedure is becoming too costly, or that the other party is not acting in good faith, the party may withdraw from a mediation process at any time and seek to resolve the dispute through litigation or arbitration.
Min provides a list of the kinds of concerns addressed by dispute-resolution clauses. She also highlights the usefulness of arbitration and mediation for developing countries, but public sector entities in many parts of the world will find the discussion, and these tools, useful. Such entities often lack the resources to pursue extended litigation, a process that also frequently places them on unfamiliar cultural and legal ground. By formulating dispute resolution policies, institutions in developing countries can place themselves in a fairer, less expensive, and less antagonistic forum for resolving disagreements.
Source: Min7
Finally, the chapter discusses extensively the activities and services of the Arbitration and Mediation Center, which functions under the World Intellectual Property Organization (WIPO).
A different type of dispute may emerge under parallel trade practices (involving “gray market” imports). As Matthews and Munoz-Tellez write,8 parallel trade occurs when products produced under the protection of a patent, trademark, or copyright in one market are subsequently exported to a second market and sold there without the authorization of the local owner of the IP right. Often, the local owner of the IP right will also be a local dealer who, through a license or other exclusive agreement, has been authorized by the patent, copyright, or trademark holder to market the protected product. Naturally, when the licensed dealer has an exclusive agreement, he or she expects to be the only party supplying the product in the local market. Importantly, parallel trade does not refer to the trade of pirated or counterfeit products. These are unauthorized versions of products that infringe an IP right. Parallel imports, on the other hand, are imports of genuine, often branded, products that do not violate an IP right per se, but importing the product will not have been authorized by the right holder.
Engaging in parallel trade is a legal option provided within the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). The Doha Declaration reaffirmed that developing countries can use parallel imports to support public health. Such countries can obtain access to lower-priced patented and/or branded products, such as medicines and basic agricultural inputs, by incorporating legislation to allow for parallel imports. TRIPS permits member states of the World Trade Organization (WTO) to design their own exhaustion of patent rights regimes. Hence, the state’s legal framework for parallel trade is based on its own exhaustion of patent rights doctrine:
- national exhaustion, whereby the exclusive rights of patent holders cease only after the first sale of a product within the national borders (parallel imports can be blocked at the border)
- regional exhaustion, whereby the exclusive rights of patent holders cease after the first sale in the regional market (parallel trade permitted within the regional group)
- international exhaustion, whereby the exclusive rights of patent holders cease after the first sale in any market (parallel trade permitted)
The chapter focuses on how parallel trade can provide developing countries with greater access to medicines and to basic inputs for agricultural production (such as pesticides and fertilizers) at lower prices.
Thus, developing countries can incorporate into their national laws the principle of international exhaustion of rights, thus allowing for parallel imports on an international scale. In other words, developing countries can decide whether or not to allow parallel importation for all or particular IP rights.
Although parallel trade has obvious benefits for developing countries, there are also potential disadvantages. For example, the chapter notes that parallel trade might:
- reduce incentives for investment in the pharmaceutical and agricultural sectors
- reduce the incentives for rights holders to donate products at low cost or free of charge to developing countries due to fear of re-importation elsewhere
- reduce the willingness of rights holders or licensed local owners to supply particular markets
When implementing measures to facilitate parallel trade, developing countries should ensure an effective system by adequately regulating the quality and safety of parallel imports. At the same time, they need to prevent low-priced patented products in developing countries from entering high-priced developed country markets. Otherwise, patent holders, particularly in the pharmaceutical industry, could be discouraged from pricing their products differently in different markets in order to benefit developing countries. The chapter offers model legislative provisions to enable parallel imports and concludes by urging policymakers in developing countries to promote access to medicines and to support poor farmers by fully utilizing the parallel trade options available under TRIPS.
Endnotes
1 Chapter 15.1 by HH Feindt titled Administration of Technology Licenses, p. 1395.
2 Although impressive, such revenue flow is not the OTT’s principle mission. Rather, by instituting and running an organized and professional office, the NIH furthers its mission of a timely introduction of new products and technologies into the marketplace. In this way, the fruits of NIH research and development are made commercially available, fostering economic development and serving the greater public good through the introduction of critical advances in health care. Furthermore, the NIH OTT fully recognizes that potential licensees will be from both developed and developing countries, such that the range of beneficiaries is truly global in scope.
3 This database has been provided by the Whitehead Institute for Biomedical Research. See also Chapter 6.12 by A Hamzaoui titled WIIPS™: Whitehead Institute Intellectual Property System (A Relational Database for IP Management and Technology Transfer), p. 649.
4 Chapter 15.2 by HW Haeussler titled Policing Intellectual Property, p. 1405.
5 This may happen pursuant to two defenses in equity: (1) laches, when the patentee waits too long (an inexcusable delay) before taking action against a presumed infringer and (2) equitable estoppel, when the presumed infringer, relying on actions or communications from the patentee, reasonably believes that he or she can practice the patented product or process.
6 Chapter 15.3 by EJ Min titled Alternative Dispute-Resolution Procedures: International View, p. 1415.
7 Ibid.
8 Chapter 15.4 by D Matthews and V Munoz-Tellez titled Parallel Trade: A User’s Guide, p. 1429.
 Abstract
Administration of Technology Licenses
by Hans H. Feindt
Abstract:
The National Institutes of Health Office of Technology Transfer (NIH OTT) administers technology licenses for the NIH, generating substantial royalties (in the millions of dollars). Although this revenue flow is important, the NIH OTTs principal mission is the timely introduction of new products and technologies into the marketplace to ensure that the fruits of NIH research and development are made commercially available to serve the greater public good. The NIH OTT utilizes six types of technology licenses:
- commercial evaluation licenses (also known as options)
- patent commercialization licenses (either exclusive or nonexclusive)
- nonexclusive patent licenses (for internal use)
- biological materials licenses
- software licenses
The NIH OTT insists that licenses are drafted with well-defined financial terms and clearly delineated reporting obligations, so that both parties to the license (NIH as licensor and, for example, a biotech firm as licensee) understand their respective obligations. The NIH OTT seeks to build cooperative relationships with its licensees in order to facilitate problem solving discussions, resolve outstanding issues, and identify possible opportunities for advancing commercialization of products and/or services. As a best practices licensor, the NIH OTT carefully manages license administration by monitoring commercial development performance benchmarks, reviewing sales reports, and enforcing other license obligations. The office will also, if necessary, impose sanctions in license enforcement and implement procedures for dealing with infringement of its patents. The policies, protocols, and procedures of the NIH OTT have broad applicability to both developed and developing countries; scientists, administrators, technology managers, intellectual property professionals, and even attorneys can learn from the NIH OTT, a good example of an office operating effectively, efficiently, and profitably by employing best practices.
Abstract
Alternative Dispute-Resolution Procedures: International View
by Eun-Joo Min
Abstract:
As multinational technology-development partnerships have become more common, so have disputes between the parties. Litigation, however, is not the only option for resolving such disputes. In fact, for partnerships between entities in developing and developed countries, litigation may be a complicated, time-consuming, expensive, and doubtful process. Arbitration and mediation may offer the promise of more effectively resolving disputes, and this chapter explains how these methods work, their advantages and disadvantages, and suggests which questions should be asked (especially for a developing country institution) to begin to establish a dispute prevention and resolution strategy. The chapter offers both strategic and practical insights about how to use these mechanisms to resolve disputes and preserve partnerships.
Abstract
Parallel Trade: A User’s Guide
by Duncan Matthews, Viviana Munoz-Tellez
Abstract:
This chapter provides guidance about parallel trade to developing country policy-makers and other stakeholders in intellectual property. What is parallel trade? And how can it be utilized to promote access to medicines and support poor farmers in developing countries? Engaging in parallel trade is an option provided by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organization. Furthermore, the 2001 Doha Declaration on TRIPS and Public Health confirmed that developing countries could use parallel imports to support public health. As a result, developing countries can ensure access to lower-priced patented and/or branded products, such as medicines and basic agricultural inputs, by incorporating legislation to allow for parallel imports. When implementing measures to facilitate parallel trade, developing countries can establish and maintain an effective system by adequately regulating the quality, safety, and health of parallel imports. At the same time, developing countries need to prevent low-priced patented products available in their countries from entering high-priced developed country markets.
Abstract
Policing Intellectual Property
by H. Walter Haeussler, Richard S. Cahoon
Abstract:
A university’s intellectual property (IP) cannot be simply shelved and forgotten. IP, with patents as a particularly cogent example, must be managed, monitored, maintained, and policed in an ongoing “cultivation” of the IP rights. For patents, it is important to be able to identify potential infringement early, by means of coordinated surveillance by the technology transfer office. If, and when, possible patent infringement is detected, it will then be necessary to evaluate the type of infringement, that is, direct or contributory, and also to assess whether the activity legally appears to be infringing, reading on each and every element of a patent claim. Strategic and business considerations must be considered as the university decides what course of action might be appropriate in response to an alleged infringement of a patent. Specifically, in the context of litigation, the university must consider whom to sue (if there are multiple infringers), when to sue (if too late, could risk loss of IP rights), and where to bring suit (for a favorable venue). An even more critical consideration is whether to even litigate at all. It may be wiser to seek one of various forms of alternate dispute resolution, for example, negotiation, mediation, or arbitration. It is important to never forget that litigation is expensive, risky, and unpredictable. Hence, it should be viewed as not the first option, but as the final one, and it should be approached as a cold business decision and not to give teeth to emotions or carry out revenge. Throughout the process of managing and policing its IP rights, a university should have access to legal counsel. Finally, proactive, good license hygiene is the best way to proceed, and the most effective way to avoid expensive litigation. By demonstrating credibility, conviction, and focus, the university will show potential infringers that it is serious about policing its IP, and that they therefore won’t be able to escape the university’s diligent surveillance. Licensing, and not infringement, will then become the only sensible route to accessing the patent rights.
Abstract
Conducting IP Audits
by Michael Blakeney
Abstract:
This chapter explains how important it is for a research institute to audit both the intellectual property (IP) that it generates and the third party IP that its researchers utilize. Such an audit will have the practical consequence of enabling the research institute (when appropriate) to secure ownership, maintain, and manage the IP for which it is responsible.
Abstract
Field-of-Use Licensing
by Sandra L. Shotwell
Abstract:
Field-of-use licensing provides the licensor with greater control over the use of its intellectual property, while maximizing the use and value of the technology. In order to maximize the use of a given technology, managers will have some additional work to do as they identify, negotiate with, and manage more than one licensee. Special issues related to multiple licensees in distinct or overlapping fields will have to be handled with forethought and a balancing of interests. When is field-of-use licensing worth the extra effort? When more than one company is needed to fully develop a technology’s potential, when different licensees are needed to address different markets, or when field-of-use licensing has the potential to significantly increase the financial return from a technology. In all of these situations, field-of-use licensing can produce better results for everyone involved.
Abstract
Filing and Defending Patents in Different Jurisdictions
by Ronald Yin, Sean Cunningham
Abstract:
In order to build an effective patent portfolio, an organization must (1) understand the dynamics of the international patent landscape: how to establish foreign priority, where to file patent applications, and the advantages and disadvantages of pursuing various filing options; (2) determine in which countries and/or jurisdictions the organization should seek patent protection based on its objectives (whether commercial or humanitarian access); and (3) anticipate the possibility of litigation and know what its options for litigation are.
Abstract
IP Portfolio Management: Negotiating the Information Labyrinth
by Jeremy Burdon
Abstract:
The management of intellectual property is all about managing innovation with the procedures and processes that are required to turn that innovation into valuable patent rights. A truly strategic approach to IP management will span conception to product market release. Integrating IP management into the R&D, advance development, and product development cycles seamlessly provides opportunities to gain and enhance IP protection while offering the potential to reduce risk and lower costs. The following chapter discusses some of the key elements of IP portfolio management and how the combination of the right IP tools, procedural know-how, and organizational attributes and behaviors can contribute to successful implementation.
Abstract
Monitoring, Evaluating, and Assessing Impact
by Sibongile Pefile
Abstract:
Much has been written about the socio-economic benefits and competitive advantage achieved by developed countries as a result of investing in scientific research and technological innovation. For developing and emerging economies, sustainable development is dependent on establishing and supporting R&D institutions that not only perform good science, but also effectively share their knowledge and technology outputs. Both the extent to which a return on an investment is realized from R&D activities and the magnitude of the resulting impact on intended beneficiaries are important to funders, policy-makers, taxpayers, government officials, development agencies, and the research institutions themselves. This chapter provides guidance on building organizational capacity to plan, monitor, evaluate, and assess the impact of R&D investments. It should be noted that the chapter does not address measuring the performance of a Technology Transfer Office to manage intellectual property, but rather focuses on determining the socio-economic impact of transferred knowledge and technology.
Abstract
Trademark Primer
by William Needle
Abstract:
Trademarks, in the broadest sense, encompass a range of indicators for goods and/or services, including service marks, collective marks, certification marks, trade names and trade dress. A trademark, which may be a name, symbol, feature, or design, functions as an indicator of source and identifies and distinguishes a good or service, enabling customers to ascertain the quality of the good (or service) based on the trademark. Unlike other forms of intellectual property rights (for example, copyrights and patents), the rights extended by trademarks are not generated from the creative activity of an author or inventor, but rather via their use in commerce, and it is the customer’s association of the trademark with a specific product (or service) that is the key factor in establishing rights. The relative effectiveness of a trademark depends on its degree of distinctiveness. By way of classifying trademarks, a hierarchy based on strength of protection, from fanciful to merely descriptive, has been established. Whereas fanciful trademarks are inherently distinctive because they are terms invented solely for a specific purpose (for example, Kotex), descriptive marks (for example, Chap-Stick) must acquire secondary meaning to become protectable. In the United States, trademarks are protected by both state and federal laws. Although federal trademark registration is not necessary to assert trademark rights, it affords many advantages and benefits to the owner, and hence is by far the preferred means of protection. It is important to remember, however, that trademarks must always be maintained, protected, and correctly used. Their strength, and therefore value, is directly linked to public perception.
Abstract
Using Milestones in Healthcare Product Licensing Deals to Ensure Access in Developing Countries
by Joachim Oehler
Abstract:
When public–sector organizations and public–private product development partnerships (PDPs) manage intellectual property (IP), they need to balance the commercial interests of private–sector manufacturers with the public sector’s mission to obtain access to products at the lowest possible cost. An important tool for achieving this balance is the detailed definition of contractual milestones, which should clearly specify the terms for pricing to the public sector, territory and exclusivity, regulatory work, and time to market. Milestones should not, however, be cast in stone. Based on detailed analyses of market conditions, milestones need to remain adjustable throughout the life of the contract. When well defined, milestones can be used to ensure the availability of the most modern healthcare products to the developing world. After all, for the public sector, successful IP management is defined by how many poor people a product will reach, how easily it will be available to them, and who and how many will be able to afford the product. Accordingly, out-licensing intellectual property from public–sector-based organizations to private–sector partners requires the licensor to actively guard public–sector interests.
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