Afzana Anwer* offers insight into best practices for capturing and protecting innovation in scientific research to generate alternative funding sources for universities.
Faced with increasing financial pressure to generate income from commercialising research, UK universities must maximise revenue streams from their technology transfer offices (TTOs) or in-house R&D departments. TTOs commercialise intellectual property (IP) and are involved from the creation of an idea to selling the product and/or service to the market, using private, state, or investor capital.
This, at a time approaching Brexit and questionable access to competitive EU funding, together with increased numbers of company collaborations and the rise of university technical incubators, means there is a focus on who is best positioned to secure the desired return on an investment. In order for universities or in-house departments to achieve this, there are legal challenges, including optimising capture, protection, defence, and enforcement of intellectual property rights (IPRs) and minimising risk in contractual obligations.
There is a compelling need to find alternative sources to fund university research in a post-Brexit world where competitive EU funding may not be as forthcoming, and taking research to industry may be more important than before. Despite the UK Government’s guarantee to underwrite EU funding, such as Horizon 2020, to ensure payment of those funds, those funding applications must be submitted before Brexit – albeit can be approved after exit – and this may not happen in time. In the digital transformation era, investment in Materials Engineering and manufacturing innovation is taking centre stage for many big named companies, such as novel materials in turbine blades, additive manufacturing, 3D printing, silicon carbide, and ceramic matrix composites, which will revolutionise power efficiency across many applications in healthcare, renewables, and aviation. This can be a wake up call for university research to take their inventions to these industry players now but best practices are required.
With reduced budgets, coupled with the need to improve efficiencies, companies increasingly outsource part of their R&D functions to universities, setting the stage for bargaining of property rights. Questions arise, such as, is the pipeline of innovation sufficiently identified and who should be the owner of these property rights – the company investing capital, providing opportunities for application, development and scalability, or the university providing basic research, facilities, and knowledge? Such rights have to be discussed in contractual negotiations. Many of the weaknesses in the TTOs or in-house departments can be addressed by implementing best practices to adequately capture, protect and exploit its innovation.
Ensuring IP protection is key for the next round of funding, demonstrating proof of concept, assessing the innovation for fair value and initial public offerings (IPOs), and creating spinouts. However, it is not necessarily a race to file patents, especially those lacking quality that cannot be enforced. Other types of IP can be used such as trade secrets, copyright, and database rights, which are increasingly relied upon to generate income.
Unless otherwise contracted, the university owns the IP and not the student. For PhD students who are usually not employees of the university, there needs to be a contract in place at the start addressing IP ownership. For example, copyright is automatic for the original creator of works when fixed in a tangible medium of expression, such as when it is stored on some medium in which it can be perceived, reproduced or communicated. Copyright rights would need to be assigned to the university.
Opportunities to partner externally must be carefully considered in an increasingly complex legal landscape. As new applications in materials science evolve into the digital space, relevant IP may not need to be home grown in cases where it can be licensed from open sources, for example, to expedite go-to-market strategy for new products and/or services. Vendor selection is key, as there is an ever increasing market space due to new players emerging in cloud computing. Furthermore, legal due diligence would be required for material science applications for data analytics products, such as compliance with data protection laws.
While there is a pressure for academics to publish their work, it is necessary that a patentable invention is novel. A typical scenario in this regard is where a researcher discovers a new material composition, use or process for making it, and makes a presentation for public display, publishes or records the content at a conference or trade show, discusses it with third parties or provides a demonstration, all without confidentiality obligations in place before making the content public. In doing so, the discovery may have become public knowledge and thus novelty is destroyed for any subsequent patent filing by the researcher.
The law states that an invention shall be considered new if it does not form part of the state of the art, which means everything made available to the public by means of a written or oral description, by use or in any other way, before the date of filing of the patent application – so-called prior art or prior use. The novelty standard is recognised worldwide, so any piece of prior art or prior use surfacing in the public domain could destroy novelty.
Various model legal frameworks can be created to best suit a given technology transfer licensing deal between the licensor, such as the university allowing third party use of its technology, and licensee, such as a company investing capital and resources in the technology, according to who provides the capital investment, resources, facilities, people, and knowledge.
Exclusivity versus non-exclusivity arrangements are paramount considerations. Ownership for background IP (pre-existing IP each party has before the contract is entered into) and foreground IP (newly created IP or for improvements for the duration of the contract and thereafter) need to be noted. For example, where the university may provide basic research and staff, a company may exploit that research in their field of use with development and scalability resources along with investment capital. In this scenario, contractual rights need to be negotiated particularly for exclusivity, IP ownership, payment, field of use, geographies and channels of distribution, confidentiality, warranties, indemnities, and termination clauses.
Universities tend to over-value their innovation with excessive upfront payments. Companies are more likely to structure deals around small annual fees at the start (where companies pay for IP registration costs), and replace exclusivity terms with non-exclusivity terms when insufficient licensing income is generated over a fixed time period. Payment terms should be set during project planning, particularly with regard to late payments and when termination is triggered.
Patent rights and infringing acts
There are many types of intellectual property rights (IPRs) that can be registered, including trade secrets, designs, copyright, trademarks, and patents. Registering IPRs can ensure advantages, particularly when litigating, generating income from IP licensing and possible tax relief.
Unregistered rights also exist for trademarks, copyrights and designs. These should be reviewed in light of Brexit, where any existing European rights should be transferred to UK law.
Data rights are more recognised and, as more data is generated from machines with advanced analytics, tracking, and management of data is critical. When analysed data use behavioural patterns that can be traced back to personal data, compliance with regulations is crucial to avoid penalties – under both existing laws and the incoming General Data Protection Regulation. Trade secrets and know-how are increasingly important rights and safeguards must be put in place to protect and defend these.
Researchers need to be mindful, particularly in competitive markets. Companies are increasingly defending their IP portfolios and patent trolls are on the rise, particularly in digital applications, where more standard-essential patents – those that claim an invention that must be used to comply with a technical standard – are emerging.
A patent confers a right or title for a set period, especially the sole right to exclude others from making, using or selling an invention.
To be liable for infringement of a valid product or process patent, one must, without the patentee’s consent, make, use, import, or keep the product or process for disposal or otherwise. UK patent law also provides for liability for indirect infringement against a person that supplies or directs others to supply in the UK any of the means relating to an essential element of the invention. However, there is a defence to infringement, called the experimental use exception, which exempts from patent infringement acts done for experimental purposes relating to the subject matter of the invention. While there may be uncertainty as to what constitutes experimental use, particularly when attempting to distinguish between what is classed as research versus commercial activities, the defence can be considered for basic and applied research activities conducted at universities or any other entity carrying out research.
Looking to the future
There is an increased patent infringement litigation landscape on the horizon, due to more competition, regulation and crowded markets, along with the uncertainties created by Brexit and the Unified Patent Court – a proposed EU patent court. While determinative on a case-by-case basis, the defences of experimental use exception and prior user right can be used. However, vague definitions for what falls within the scope of these defences mean there is uncertainty and cases for indirect infringement could be enforced.
In light of this, TTOs and in-house departments seeking to increase revenue to drive UK innovation need best practices to secure new sources of funding, not dependent on EU funding alone, strengthening industry collaborations. Policies and procedures should be revised to best capture, defend and enforce IPRs.
Best practice tips:
- Ensure all confidentiality measures are in place, including signed non-disclosure agreements, before disclosing any of your work to third parties
- Consider implementing process steps for preserving trade secrets and know-how and/or filing a patent application if you are unable to ensure confidentiality, if the content is already in the public domain or has been stolen. If stolen, you have six months to file a patent application
- For any content published online, keep track of the date the information was made available to the public
- Restrict access of confidential information to a limited need to know circle of people, using contracts and process steps including password protection, for example to prevent web pages forming part of the state of the prior art
- Decide the primary purpose of the research. Another potential defence is the so-called prior user right for past secret use, also narrowly applied. The typical scenario is where a researcher has been working on experiments in secret, with no public disclosure and confidentiality obligations in place
- In order to preserve a prior use defence, ensure best practice laboratory recording of results with all confidentiality measures in place
To read the Patents Act 1977, visit bit.ly/2B8ZCXr
*Afzana Anwer undertook a PhD in Materials Engineering at the University of Cambridge, UK, and carried out research at Massachusetts Institute of Technology, USA, after completing a MSc in Materials Science and BSc in Chemistry. She can practice law in Massachusetts and is on the UK Roll of Solicitors. Anwer currently sits on Pinsent Masons’ Vario panel of lawyers.