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Universities today increasingly seek to leverage their research firepower and become players in the venture capital marketplace, while retaining their status as educational, nonprofit institutions. Federal legislation enacted several decades ago encourages universities and federal government research laboratories to undertake such activities. As a result, many technologies have moved quickly out of the pure research laboratory. Indeed, technology transfer trends first seen in the biotechnology industry in the 1980s have now expanded into nanotechnology as well. See, generally, Cynthia Robbins-Roth, From Alchemy to IPO: The Business of Technology (Perseus Publishing, 2000); Mark Ratner and Danila Ratner, Nanotechnology: A Gentle Introduction to The Next Big Idea (Prentice Hall, 2003); and Jack Uldrich with Deb Newberry, The Next Big Thing is Really Small: How Nanotechnology will Change the Future of Your Business (Crown, 2003). Whether nonprofit institutions pursue biotechnology or nanotechnology, risks arise as universities and government laboratories assume dual identities in research and commerce. For example, Duke University, which was recently sued for patent infringement, has, to date, been unable to escape the litigation on the ground that it is a nonprofit institution. See Madey v. Duke, 307 F.3d 1551 (Fed. Cir. 2002), cert. pending. Another potential risk stems from the federal government’s practice of retaining “march-in” rights for federally funded inventions. Conflicts of interest can arise. Despite these risks, in view of the appealing synergies, universities today increasingly interact with companies and corporate culture and even take equity stakes in spinoff companies. Literally hundreds of nanotechnology companies have been formed. Many agree that this university/business partnering, presently so prevalent in nanotechnology, provides the U.S. economy with the engines needed to succeed in a competitive global economy. Universities bring to the table valuable intellectual property “jewels” representing fundamental technical advances with myriad potential applications. Intellectual property is generally considered to include patents, trade secrets, copyrights and trademarks. Other miscellaneous forms include mask protection, which applies to semiconductor chips and biomaterial bailment, an arrangement that was developed to allow for such things as the “sale” of antibodies. Related concepts include intellectual assets and intangible property, and the concept can be extended to business information and organizational knowledge. Merging cultures As the trend for universities to take an active role in basic and applied research and the commercial marketplaces continues, one never-ending issue is how venture capitalists and others in the corporate sphere can best manage these fast-moving, emerging technologies, while accommodating the university culture. See, generally, George S. Day and Paul J.H. Schoemaker, Wharton on Managing Emerging Technologies (John Wiley, 2000); Paul A. Gompers and Josh Lerner, The Money of Invention: How Venture Capital Creates New Wealth (Harvard Business School Press, 2001). With their entry into the marketplace, universities in recent years have become more sophisticated and creative in their patenting and technology licensing of inventions. Among intellectual properties, patents are often viewed as the primary jewel of young, high-technology companies. Universities, as well, are recognizing that they can derive significant licensing revenue from patents they obtain. Trade secrets can be the subject of a university license negotiation, although the academic pressure to publish can make trade secrets less attractive. To date, however, many universities have not adequately considered potential opportunities in trademarks in their licensing of high technology, although trademarks are another important part of IP. Ironically, many universities are savvy trademark licensors in nontechnology fields. For example, universities and their sports teams extensively protect their names, logos and mascots and license their use on apparel and other products. An interesting question (and not merely an academic one) is whether universities in coming years will seek opportunities to commercialize trademarks related to technologies they have developed. In other words, will universities seek to integrate their technology transfer departments with their trademark licensing departments? Here are five practical IP “pointers” for a university to consider when dealing at the university-corporate interface and when faced with balancing patent and trademark strategies. Understand the fundamental differences in ownership/licensing of patents and trademarks. IP ownership is a foundation of IP strategic thinking and IP portfolio building. Patent ownership begins with inventorship. Inventorship depends upon conception of an operative invention rather than its commercial use. For a patent, the inventors are its original owners. Under one or more contracts, such as an employment contract or an assignment, inventors transfer their ownership to an employer. The identity of the user of the patented technology in the marketplace is generally irrelevant to its ownership. In contrast, trademark rights are grounded not in who conceived a particular mark, but in who uses the mark in commerce for particular goods and services. While it is possible to apply to register a trademark based on one’s intent to use a mark, registration cannot occur until one demonstrates actual use of the mark in commerce on the goods and services for which one seeks registration. The provisions of a licensing transaction should recognize that trademark rights arise from use. Since use of a mark can create significant value in the goodwill associated with the mark, a trademark licensor should consider including terms in the agreement that provide that use by the licensee inures to the benefit of the licensor. Understand the concept/implications of a “naked” trademark license-a concept that is irrelevant in patent licensing. Since IP licensing is an important step in strategic thinking and portfolio exploitation, patent and trademark licensing must be carefully distinguished. A unique aspect of trademark licensing stems from the public’s expectation that goods and services offered under a mark will achieve a standard of quality that has become associated with the mark. In this way, the public becomes a silent third-party beneficiary of every trademark license agreement. As a result, a trademark license must include a provision that governs the quality of goods and services sold under the mark. The type and extent of quality control varies depending on the nature of the goods and services. However, when a trademark owner licenses use of a trademark, the agreement must provide that the goods and services sold under the mark will meet an identifiable quality standard. Trademark use must be controlled through quality control provisions and policing. Otherwise, the trademark license is a naked license. Depending upon the jurisdiction, a naked license can result in the license agreement being held unenforceable, the forfeiture of trademark rights by the licensor to the licensee, or even the abandonment of the mark, notwithstanding that there was no intent to forego trademark rights. Even when the agreement specifies a quality standard, the licensor’s failure to police use of the mark under the agreement can have similar effects. In other words, if a trademark owner authorizes another’s use of the trademark without controls, the owner may be held to have effectively abandoned the mark. Before seeking to license use of a trademark, potential licensors should realize that they must make the requisite effort to assert quality control and police use of the mark. This is in contrast to patent licenses, which need careful monitoring for other reasons, but where the “naked license” concept does not exist. Failure to understand and integrate these different licensing concepts can result in significant damage to the IP portfolio, or a waste of effort and money through inefficient negotiation and litigation. Separate agreements Consider separating patent and trademark licenses into separate agreements. Convenience and efficiency may tempt companies and universities to place all IP issues, including patents and trademarks, into one agreement. Such efficiencies may be a false economy. As previously noted, patents have a time-limited existence, while trademarks have a potentially infinite life. Indeed, a mark that becomes famous may be more valuable as time goes on. Years down the road, whether or not the company has been bought, sold or merged when its patents expire, the trademark and its licensing rights may be the most valuable asset remaining. In order to provide the flexibility to continue deriving licensing revenue from the trademark after expiration of the patent, it is useful to have separate agreements. Separate agreements avoid the possibility that the entire license agreement will be found invalid for attempting to extend the monopoly beyond the life of the patent. If a trademark license is included in the patent license, the licensor should strive to negotiate trademark license provisions that are distinct from the patent license provisions. For example, the agreement could include a separate royalty calculation for the patents and the trademarks, with only the patent royalty ending at the expiration of the patent. One should also consider terms that allow renegotiation of the trademark royalty as the mark becomes more widely recognized in the marketplace. In any case, during negotiation, a potential licensor should avoid quickly “tacking on” a trademark license provision into a patent license without a thorough consideration of its effect on the remaining terms of the agreement. Know how the university’s and licensee’s activities, including the use of terms, could positively and negatively affect the value of the trademark portfolio. A trademark license should also address how the mark itself will be used by the parties in the future. One risk is that a mark which is initially distinctive will over time become so associated with the technology that it loses its distinctive quality and trademark significance. For this reason, it is important that both the licensor and the licensee avoid using the mark as a name for a technology in ways that fail to preserve brand distinction. Trademarks are typically used as adjectives, as in the XYZ brand of a particular product. Since universities operate with a different agenda from those of commercial businesses, they must be careful not to use trademarks in a way that robs them of their value. As academic institutions, universities may want to retain the freedom to carry on research and publish as if they were not in a business partnership with a spinoff company. However, the business and legal realities of trademarks require that universities take a more disciplined approach. Trademark owners (including universities) and their licensees generally need to behave in ways that increase the value of their marks rather than dilute them. Trademark registration should be pursued for marks that business partners are willing to use correctly. The university should consider acting in ways that do not harm the value of the trademark portfolio. For example, the university might want to commit to reviewing technical publications of its researchers to ensure that authors use technology marks correctly and properly identify them as trademarks. The university licensor should also insist that its licensee use the mark in a form that avoids its dilution and properly identifies it as a trademark. If the company or the university is not willing to take these fundamental steps, one may need to reconsider the commitment to the relationship and the investment in developing the mark. Early trademark planning Evaluate the merits of working trademark protection, along with patenting, into the early business plans as capital is sought. Finally, attracting investment capital requires more than a good technology; it requires a business plan that recognizes how to move that technology into the market in a way that will be commercially successful. A business plan that includes trademark planning signals to investors that the business plan has moved away from raw academic excitement to real commerce. In its early stage, a high-technology company’s trademarks may include the company name, the company logo, a name of a fundamental process to be branded and the names of its lead products. If the company is successful, it may increase the number of marks as it introduces new products. Efficiencies can be gained if branding strategies are considered early in the process of starting up the company. Relatively inexpensive trademark searching should be conducted before expensive marketing and advertising programs are begun. Finally, despite the high value of patent protection, considerations should be given early on to how this company could survive without patent protection. The above pointers reflect several key differences and similarities of patents and trademarks. Other forms of IP, such as trade secrets, copyrights, bailments of biomaterials and business information also need to be integrated with patent and trademark protection. For example, a single computer program can be protected separately under the patent laws and the copyright laws, while the computer program name or identifying logo is protected under trademark law. In the final analysis, all available legal protections need to be integrated with the business objectives, ranging from IP to tax planning. Whether they are university-related or not, nanotechnology companies that find synergy by integrating these separate facets of law and business stand a greater chance at achieving success in a competitive marketplace than those that ignore such protections. J. Steven Rutt is an associate, and Stephen B. Maebius and Brian J. McNamara are partners, in the Washington office of Foley & Lardner. They are all members of the nanotechnology industry team in the firm’s intellectual property department.

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