ANN ARBOR ? It?s a typical scenario: two companies cooperate in a joint research and development project which includes an upfront business arrangement concerning the ownership, manufacture and sale of the resulting technology and intellectual property. If the project is successful, it generates unique product ideas, samples and prototypes are exchanged, and programs are developed for the manufacture and sale of a new product. However, if the companies are not careful, their competitors may be allowed to freely use the fruits of their research and development.
Recently, a patent was found to be invalid due in part to the owner?s own contractual activities. There, the patent owner entered into an agreement involving joint funding of research and development on ?any human diagnostic product resulting from the program of research?. As the research focused on a particular type of diagnostic product, the companies modified the agreement to make it clear that the particular diagnostic product was included in the agreement. The modified R&D agreement further specified that the patent owner was to supply a certain percentage of the other party?s requirements of that diagnostic product. As development of the product neared completion, a working sample was transferred to the other company.
A patent application was filed for the diagnostic product before it was made available to the public, but more than a year after the working sample was developed. Although a patent was issued, the patent was eventually found to be invalid. Under U.S. patent laws, an invention that is the subject of a commercial offer for sale and which is ready for patenting must have a patent application filed on the invention within a one year time period. Failure to do so can result in the invention being dedicated to the public and the inability to obtain a valid patent. Since the R&D agreement for the diagnostic product included sale and supply terms that were accepted and enforceable, the diagnostic product was ?offered for sale? more than one year before the patent application was filed.
To prevent such unintentional loss of patent rights, companies and their intellectual property managers must exercise a higher level of oversight when dealing with inventions created under joint research and development agreements. Companies entering into these agreements must identify when enforceable supply terms are present, and be diligent in monitoring the progress of the research and development to promptly seek appropriate intellectual property protection. One strategy companies may consider is the filing of provisional patent applications at certain milestones of development to ensure protection of their valuable intellectual property.
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This column was written by Michael Spink of Brinks, Hofer, Gilson & Lione. Mr. Spink specializes in intellectual property law practice, focusing on all aspects of client counseling, including procurement, licensing and opinions on patents, trademarks and copyrights.
