patent derivation, inventorship disputes and trade secret...

Patent Derivation, Inventorship Disputes and

Trade Secret Misappropriation: Protecting

Proprietary Research

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WEDNESDAY, JUNE 12, 2019

Presenting a live 90-minute webinar with interactive Q&A

Peter M. Brody, Partner, Ropes & Gray, Washington, D.C.

Scott A. McKeown, Partner, Ropes & Gray, Alexandria, Va.

Filko Prugo, M.S., J.D., Partner, Ropes & Gray, New York

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Today’s Discussion

• Typical Fact Pattern

• Derivation Proceedings

• Protecting Proprietary Research

• Alternative Litigation Options

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Typical Fact Pattern

• Parties A and B cooperate on a project.

• Work conducted under NDA.

• Party A transfers information to Party B relating to the project.

• Party B files a separate patent application.

• Party A claims Party B’s patent application embodies confidential information provided under NDA.

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Derivation Proceedings

35 USC § 135(a)(1): An applicant for patent may file a petition with respect to an invention to institute a derivation proceeding in the Office. The petition shall set forth with particularity the basis for finding that an individual named in an earlier application as the inventor or a joint inventor derived such invention from an individual named in the petitioner’s application as the inventor or a joint inventor and, without authorization, the earlier application claiming such invention was filed. Whenever the Director determines that a petition filed under this subsection demonstrates that the standards for instituting a derivation proceeding are met, the Director may institute a derivation proceeding.

• Prior to the AIA, such disputes were addressed in interference proceedings.

• Pre-AIA judicial remedies (i.e., seeking assignment of patent or application and/or correcting inventors) were and still are available for issues (e.g., breach of contract, trade secret misappropriation).

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• Patent derivation has three primary requirements:

• Defendant filed separate patent application directed to petitioner’s invention.

• Defendant derived invention from petitioner (or inventors named thereby) without authorization.

• Defendant’s application has an earlier effective filing date (EFD) than that of the petitioner.

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• For derivation, petitioners must prove both:

• Original conception of derived invention

and

• Communication of derived invention to the accused

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• When determining whether a derivation is appropriate, check that:

• The invention was originally conceived by the petitioner.

• The invention was communicated by petitioner or a party thereof to the accused.

• The accused actually has an earlier EFD than the petitioner for the invention.

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35 USC § 135(a)(3): For purposes of this section, an application shall not be deemed to be an earlier application with respect to an invention, relative to another application, unless a claim to the invention was or could have been made in such application having an effective filing date that is earlier than the effective filing date of any claim to the invention that was or could have been made in such other application.

35 USC § 100(i)(1): The term “effective filing date” for a claimed invention in a patent or application

for patent means—

(A) if subparagraph (B) does not apply, the actual filing date of the patent or the application for

the patent containing a claim to the invention; or

(B) the filing date of the earliest application for which the patent or application is entitled, as

to such invention, to a right of priority under section 119, 365(a), 365(b), 386(a), or 386(b)

or to the benefit of an earlier filing date under section 120, 121, 365(c), or 386(c).

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• Accurate determination of EFD is key.

• Claiming priority to a provisional application requires § 112 support.

• An application’s EFD may differ from the EFD of the invention at issue.

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Defendant Provisional

• Invention not disclosed

Petitioner Provisional

• § 112 support

Defendant Utility

• § 112 support

Petitioner Utility

• § 112 support

Petitioners have later EFD for application, but earlier EFD for invention.


• Risks of Derivation Proceedings include:

• Admission that accused filed patent application for client’s invention earlier than client.

• Potential admission of prior art to client’s application.

• Must be filed within 1 year of the first publication of claims to an invention that is substantially the same as that of the petitioner.

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• Derivation proceedings at the PTAB are relatively untested and unpredictable.

• Only 18 derivations proceedings publicly filed

• Only one derivation proceeding has been instituted before the PTAB to date: Andersen Corp. v. GED Integrated Solutions, Inc., DER2017-00007

• On March 20, 2019, PTAB issued a final written decision, ruling that Andersen failed to prove that petitioner communicated conception of the complete invention as recited in respondent’s claim.

• Andersen is appealing the PTAB decision to the Federal Circuit.

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• Key takeaways from Andersen Corp. v. GED Integrated Solutions, Inc.

• Party asserting derivation must establish and corroborate both:

• Prior conception of the claimed subject matter, and

• Communication of that conception to an inventor of the other party.

• Petitioner must demonstrate that any challenged claim of the respondent’s patent or application is “the same or substantially the same” as at least one of petitioner’s claims.

• Preponderance of Evidence Standard.

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Protecting Proprietary Research

• Employers face the risk of departing employees retaining research data, methods, and knowledge for personal use.

• Methods by which employers can protect themselves include:

• Strict employment agreements help to mitigate risk.

• Thorough offboarding procedures.

• Detailed data management protocols.

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• Typical Research Scenarios.

• Scenario 1: A researcher is heavily involved in early-stage R&D efforts at a large pharmaceutical company.

• Researcher leaves company to found a biotech start-up.

• Start-up files for patents.

• How can the large pharmaceutical company protect its IP?

• Monitor the patent filing activities of the biotech start-up.

• Put a watch on the activities of the departed employee.

• Good practice for any departed employee with a record of HR issues and/or involvement in highly sensitive research.

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• Typical Research Scenarios, continued.

• Scenario 2: A researcher works at a nonprofit research institution (e.g., a hospital).

• Researcher engages an outside, third party investor.

• The outside, third party investor files for patents.

• How can the nonprofit research institution protect its IP?

• Monitor the patent filing activities of the third party investor.

• Put a watch on the activities of the third party investor.

• Especially important if the research institution has not previously worked with said investor.

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• Alternative approaches to resolving the conflict include:

• Patent prosecution strategies.

• Request assignment of accused patent to petitioner.

• Request deletion of claims from accused patent directed to petitioner’s invention.

• Amendment of petitioner’s claims.

• Correction of inventorship.

• Communication with accused party to raise and potentially peacefully resolve the issue.

• District Court litigation.

• Correction of inventorship.

• Derivation Claims.

• Trade Secret Misappropriation.

• Breach of Contract.

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• District Court Correction of Inventorship

• District courts can also ameliorate inventorshipdisputes.

• Can seek to correct inventors on an issued patent.

• Can also request declaratory judgment of patent ownership or injunction requiring assignment.

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• District Court Derivation Proceedings

• 35 USC § 291• (a) IN GENERAL.—The owner of a patent may have relief by civil

action against the owner of another patent that claims the same invention and has an earlier effective filing date, if the invention claimed in such other patent was derived from the inventor of the invention claimed in the patent owned by the person seeking relief under this section.

• (b) FILING LIMITATION.—An action under this section may be filed only before the end of the 1-year period beginning on the date of the issuance of the first patent containing a claim to the allegedly derived invention and naming an individual alleged to have derived such invention as the inventor or joint inventor.

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Alternative Litigation Options

• Derivation overlaps a number of other legal issues, including:

• Trade Secret Misappropriation.

• Ensure other trade secrets are not also at risk.

• Can also be claimed in federal or district court litigation.


• Inventorship Disputes.

• Criminal Referal?

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• “Defend Trade Secrets Act of 2016” (DTSA).

• Applies to any misappropriation “for which any act occurs on or after the date of the enactment” of the DTSA.

• An owner of a trade secret may bring a federal civil action for injunctive relief or damages if aggrieved by misappropriation of a trade secret “related to a product or service used in, or intended for use in, interstate or federal commerce.”

• Trade secret definition – requires that protected information not be known or readily ascertainable to “persons who can obtain economic value from its disclosure or use” in line with the UTSA (Uniform Trade Secrets Act).

• Potential injunctive relief.

• Court may grant an injunction “provided the order does not prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation.”

• No specific provision (as there is under UTSA) for terminating injunction once information has ceased to be a trade secret.

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• Remedies

• Potential injunctive relief.

• Court may grant an injunction “provided the order does not prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation.”

• No specific provision (as there is under UTSA) for terminating injunction once information has ceased to be a trade secret.

• Monetary relief.

• Potential economic recovery—actual damages, unjust enrichment damages, or in lieu of damages, a reasonable royalty.

• Potential for exemplary damages of 2 times actual damages.

• Potential for recovery of attorney’s fees by either side if claim made or opposed in bad faith or if misappropriation willful or malicious.

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DTSA – Key Features.

• 3 year statute of limitations.

• Does not pre-empt state law.

• Exception for whistleblower protections.

• Ex parte seizures.

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• Express provision for ex parte seizure orders “to prevent the propagation or dissemination of a trade secret that is the subject of the action.”

• Must be an affidavit or verified complaint.

• Explaining why a noticed injunction proceeding would be inadequate.

• Establishing likely success on the merits, that irreparable harm will occur without seizure, and that harm to applicant “substantially” outweighs harm to any third party.

• Burden of proof is on applicant for the order.

• Applicant liable for wrongful or excessive seizure.

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• Seizure is only available in “extraordinary circumstances” and target must be in “actual” possession

• Seizure only by federal law enforcement with necessary assistance from state officials or technical experts (bound by confidentiality)—not the applicant

• Court controls when and how seizure is carried out

• Whether force may be used to obtain information from locked areas

• Whether to have a special master (bound by confidentiality) sort the information

• Federal Judicial Center required to develop “best practices” for seizures and for handling electronically stored information

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ROPES & GRAY

• Over 55% increase in trade secret filings since DTSA.*All trade secret cases filed from 2009 through 2018

* Lex Machina Trade Secret Report (mid-2018) and updated statistics through 5/2019


933888 887 883

911 906866 860

1134

1409

0

200

400

600

800

1000

1200

1400

1600

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fil

ing

s

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• Employment Agreements typically include strict policies regarding Intellectual Property ownership and use.

• Unauthorized use of IP developed under contract can be subject to civil action.

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Phio Pharm. Corp v. Khvorova, 18-cv-12181 (D. Mass.)

• Classic Scenario

– Employee Khvorova allegedly took trade secrets during employment at Phio Pharm. and used them to apply for a patent assigned to her new employer, the University of Massachusetts Medical School.

• Multiple Forms of Protection

– Phio has multiple employment agreements allegedly establishing confidentiality obligations.

– Phio describes detecting and investigating emails and downloads removing data and confidential information.

– Phio appeared to monitor Khvorova’s publications and patent applications after her employment ended.

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Phio Pharm. Corp v. Khvorova, 18-cv-12181 (D. Mass.)

• Mix of Claims

– Phio asserts a federal claim under the Defend Trade Secrets Act.

– Phio also asserts several Massachusetts claims, including under the Massachusetts Trade Secrets Act, for breach of contract, and for unfair competition, etc.

• Remedy

– Phio seeks the return of documents and tangible trade secret information as well as a permanent injunction against further use or disclosure of trade secrets.

• Patent Office

– Separately submitted a document showing that Khvorovaactually assigned the patent application to Phio to the USPTO.

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Thank You!

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