It is clear that the economic downturn has lessened the appetite for companies to spend money on anything not perceived as a “necessary business expense.” The importance of intellectual property (IP) rights in a 21st century, knowledge economy, however, dictates that individual inventors and small- and medium-sized businesses (“SMBs”) find capital to file for patents and trademarks relating to their truly innovative products and services.
The above then begs the question: How can SMBs save money in hiring and engaging IP legal counsel? Well, the answer to this question contains many variables related to the specific IP attorney being hired. Such variables include the region where the IP attorney works, the size of law firm in which they practice, their level of experience, the complexity of the IP involved, etc.
The above variables aside, there is one constant in the price equation that I consistently advise SMBs to pay attention to – the preparation of their disclosure materials BEFORE meeting with any newly-engaged IP counsel. That is, SMBs (and individual entrepreneurs) can directly and significantly control their IP legal cost through careful preparation of their disclosure materials. I have seen $5000 legal bills turned into $15000 legal bills through the needless “back and forth” between an IP attorney who is “on the clock” and a client who has prematurely engaged such IP attorney. So, what do I mean by disclosure materials and how should an SMB prepare them? Well, I answer in two parts:
With respect to an invention needing a patent application, disclosure materials means an SMB gathering and organizing all relevant papers, sketches, drawings, notes, software code, formulations, etc. that provide the IP attorney with the following information:
- Title of the invention
- The full legal names, addresses and citizenship of all inventors
- The full name, address and state of incorporation of the company who will own the patent (if any)
- A description of the problem solved by the invention
- A description of how long the problem has been around and how have others tried to solve the problem
- A description of how the invention solves the problem differently than past solutions or attempted solutions
- System diagrams showing all hardware/software components of the invention
- Flowcharts illustrating the steps of the invention
- A list any known websites, publications, patents, products, services, etc. that are relevant to the subject matter of the invention
- A description of how the invention relates to the launch of a new product or service
- Dates the invention was (or will be): first conceived; implemented as a pilot or otherwise used in the public domain; reduced to actual practice; the subject of a publication or public disclosure; sold or offered for sale; and/or internally exploited
With respect to a mark or logo needing a trademark application, disclosure materials means an SMB gathering and organizing the following information to provide to the IP attorney:
- A description of the mark
- The full name, address and state of incorporation of the entity who will own the trademark
- A description of all the types of products and/or services with which the mark is actually used or will be used
- Date of any first sale of goods bearing the mark in interstate commerce
- Copies of any specimens showing the mark as it is currently (or will be) used on or in connection with the goods or services
- A description of how the mark is actually used or intended to be used
A prepared and organized client is one who receives efficient IP legal services and a reasonable legal bill from their IP attorney, and is consequently glad to pay that reasonable bill!
I was recently contacted by a professor who was seeking advice about a piece of intellectually property (IP) he created, and that his university was profitably exploiting. Who owned the IP? Can he exploit it himself? Was he entitled to share in the proceeds above and beyond his university (base) salary? Not surprisingly, these questions are not rare. After all, universities, colleges and research institutions are hot beds of creativity. In 2008, U.S. universities and research institutions spent over $51.47B in R&D and received 3,280 issued U.S. patents, all while forming 595 new companies in IP “spin-outs.” 
Given this setting, who then owns the IP created by someone within a university community? Intuitively, the answer seems simple in the case of a tenured, research professor who develops IP related to their university research duties – the university owns it! But how about the case of an undergraduate student who creates IP totally unrelated to any of her coursework!? The student? How about certain university community citizens, such as university executives, administrators, (exempt or nonexempt) staff, graduate students, postdoctoral fellows, wage payroll employees, adjunct faculty, emeritus or retired faculty, visiting scholars and others? The analysis for those university community citizens is often a fact-intensive endeavor.
In general, under varying applicable state and federal laws where the university employs the individual in question, there is a presumption that the employee owns the rights to their IP, even though it may have been created during the course of their employment. This general rule, however, has two exceptions and one limitation.
- First Exception: If the employee has an express employment agreement, stating the contrary (i.e., an employee agreement assigning all IP to the employer/university), then the general rule does not apply.
- Second Exception: If the employee was specifically “hired to invent,” later directed to solve a specific problem, or his employment requires that he exercise his “inventive faculties,” then the above-stated general rule also does not apply.
- Limitation: Even when none of the two exceptions to the above-stated general rule apply, the employer – in the case of patented inventions – may have a non-exclusive, non-transferable, royalty-free license to practice the employee’s patented invention if it was made using the resources of the employer. This is known as an employer’s “shop right.”
An overwhelming majority of universities have an “official intellectual property policy” that requires employees, as a condition to employment, to assign their IP rights under certain circumstances (e.g., when university funds or facilities are involved in the creation of the IP). Thus, most situations fall under the above-stated first exception even though many professors and postdoctoral fellows fail to read such policies when they sign their employment agreements!
So what about the case of the undergraduate student who created IP totally unrelated to any of her coursework? What if that IP was created without a professor’s help? Well, in a recent reported case having those exact facts, a university’s lawyers demanded a 25% ownership stake and two-thirds of any profits from four undergraduate students who created a popular iPhone® application in their dorm room! Although the university eventually backed down, one campus technology transfer expert has observed that many universities “generally seek to retain ownership, or at least have a formalized mechanism for assessing ownership of a student’s work in much the same way they would regarding a faculty member’s work.”
In sum, those working/learning/creating within a university community should become familiar with their university’s intellectual property policy at the start of their affiliation, and pay attention to the agreements they sign as a part of the new university employee “on-boarding” process. And, when potentially valuable new IP is created, be vigilant about asserting their rights in such IP.
 Association of University Technology Managers, AUTM U.S. Licensing Activity Survey, FY2008: Survey Summary.