3M Seminars

1. 3M Seminars Technology Commercialization Seminar 2 Developing and Securing Intellectual Property

2. Seminar Series Overview Steps in Technology Commercialization Step 1: (Seminar 1) Identifying opportunities Step 2: (Seminar 2) Protecting The IP Step 4: (Seminar 4) Developing a Successful Business model Step 3: (Seminar 3) Financing The Venture (Seminar 5) Technology Commercialization inside Corporations

3. Seminar 3 Preview Financing the Venture: • Incorporating your business • Financing your business Speakers: • Frank Vargas – attorney, Renaissance Law Group • Panel of investors & Entrepreneurs

4. Seminar 2 Outline • Robert Atkinson, J.D. & Brad Pedersen, J.D. • IP Categories • Decision Drivers • What are patents? • Patentability vs Infringement • IP Strategy • Foreign vs Domestic • IP Goals by Stage of company • IP Do’s and Don’ts • Discussion and Questions

5. I.P. in Medical Device Industry “Aggressive litigation over medical device patents has increasingly become a corporate weapon in the battle to bring lucrative products to market and block competitors.” Source: “Patent Problems Pending”, Pioneer Press 1/12/03

6. Medical Device Patent Trends - 2002

7. Major Medical Device Litigation 92-02 Source: Gregory Aharonian, Internet Patent News Service, September 2003, www.Patent ing-art.com/economic/awards.htm

8. I.P. Categories

9. I.P. Comparison

10. Decision Drivers • Determine what category it fits into • Consider standard industry practices • Weigh these factors:

11. Examples – what type of protection? • Pacemaker lead anchor design.

12. Examples – what type of protection? • Manufacturing method for pacemaker lead.

13. Examples – what type of protection? • Software for pacemaker

14. Examples – what type of protection? • Pacemaker name.

15. Why Patent? • Protect your technology • Establish barriers to entry • Obtain financing • Provide an entity on which to establish value for your company • Leverage against lawsuits against your company • Facilitate higher acquisition value

16. What does a patent do? • Right to exclude others from • Making • Using • Selling • Importing • The invention (as defined by the claims) • For 20 years (from the filing date) • In the United States • Can sue a competitor for infringement • Can assign or license in exchange for payment

17. What does a patent NOT do? • Government enforced monopoly on the invention (claims must be self-enforced) • Protection from being sued for infringement (may still infringe other’s patent) • Guaranteed (may be found invalid or not infringed) • Capable of stopping competitive R&D (stops “commercial” activity only)

18. What are the Parts of a Patent? • Cover Page • Bibliographic Data (note filing date) • Abstract (does NOT define scope) • Sample Drawing • Drawings • Specification • Background • Summary of Invention • Detailed Description • Claims (define scope)

19. What are the Parts of a Patent? • Cover Page • Bibliographic Data (note filing date) • Abstract (does NOT define scope) • Sample drawing

20. What are the Parts of a Patent? • Drawings

21. What are the Parts of a Patent? Specification • Background • Summary of Invention • Detailed Description

22. What are the Parts of a Patent? • Claims (define scope)

23. Patentability vs. Infringement USPN 6,123,456 to Yellow et al. USPN 5,123,456 to Green et al.

24. Patentability – compare your claims to prior art • Compare claims in your patent to prior art (e.g., prior patents & publications) • Need one distinguishing feature in your claim • Novel • Non-obvious • Described in specification • Shown in drawings

25. Patentability – compare your claims to prior art Prior art USPN 5,123,456 to Green et al. Your Claim • A writing instrument, comprising: • a hollow wooden shaft; • a graphite core disposed in the shaft; and • an integral eraser attached to an end of the shaft. USPN 4,123,456 to Red et al.

26. Infringement – compare your product to other’s claim • Compare your product to other’s claims • To avoid infringement, at least one element of claim must be absent from your product • May also try to invalidate claim

27. Infringement – compare your product to other’s claim • A writing instrument, comprising: • a hollow wooden shaft; and • a graphite core disposed in the shaft, with an end protruding from an end of the shaft. U.S. Patent No. 5,123,456 to Green et al. Your Product

28. Claim Summary • Assume claim reads on “It” • “It” Invalidates claim if before • “It” Infringes claim if after CLAIM “IT” compare

29. General I.P. Strategy • Patent Portfolio (build assets) • Protect Core Technology • Broad & Enforceable IP, 3-D Photocopier Protection • Protect Product Development & Extensions • Early and Comprehensive Filings • Create Barriers to Entry • Portfolio Mining, Continuation Practice, Picket Fencing Tactics, Feature Protection, Future Protection • Freedom to Operate (limit liabilities) • Establish Clear Path • Competitive Surveillance, Opinion of Counsel, Key Licenses, Patent Bargaining Chips

30. “In the medical device business, if a company has a poor I.P. position, their value starts approaching zero very rapidly” Michael Berman IP Assets Effect Acquisition/Investment Value Company Value I.P. Value

31. Strong Freedom to Operate Position r = 20% Present Value = $402M Weak Freedom to Operate Position r = 40% Present Value = $186M IP Liabilities Effect Acquisition/Investment Value • Assume: • $100M Sales Yr. 5 • 10X Acquisition Value in Yr. 5 = $1B • Present Value = Acquisition Value ÷ (1 + r) n • n = Year = 5 • r = discount factor or risk factor

32. IP Liabilities Effect Acquisition/Investment Value • The Good - Southbay Medical • Prostate Cancer Acquisition • The Bad – Angeion Corporation • ICD Startup • The Ugly - PharmaTarget • Drug Pump Startup

33. ≤ 1 Year Initial Concepts Patent Appl. on Concepts Concept Development Add’l Patent Appl(s). & Foreign Filing Narrow Design Options Initial Infringement Search & Analysis Product Development Review / Update Filings & Analysis Design Freeze & Clinical Testing Oral Clearance Opinion FDA Submission Patent Appl. on Commercial Design Patent Appl. on Next Gen. Written Clearance Opinion FDA Approval & Launch Example of I.P. in MedicalProduct Development Process

34. Foreign Application 1 year Prosecution 2 year avg. 1 year Provisional Application Regular Application Issued Patent Same Disclosure New Claims Continuation Application 1 year Foreign Application New Disclosure New Claims C.I.P. Application Same Disclosure Claims not Elected Restriction Requirement Divisional Application Filing Time Line & Options

35. 3 months 14 + months Prepare & File Patent Application File IDS Restriction Requirement Election Office Action Response or Amendment Allowed Notice of Allowance Rejected Final Office Action Amendment After Final Allowed Issue Fee Pmt. Rejected Advisory Action Appealed Notice of Appeal & Appeal Brief File Continuation, Divisional or CIP No Appeal RCE & Amendment Allowed Issued Patent Rejected 2 + years Office Action Rejected Appeal Decision Allowed Typical U.S. Patent Prosecution Process

36. Domestic vs. Foreign Considerations • To obtain patent rights in any given country, you must have a patent in that country. • No such thing as an international or regional patent, (int’l and regional application process) • Int’l consolidated appl. process (PCT) • European consolidated appl. process (EPO) • Cost and Time • Budget $10K/country for filing (more for translations) • Budget $20K/country for prosecution • Allow 3 to 5 years for patent to issue • Extensions and delays available • Enforcement issues • Other considerations • Medical methods generally not patentable OUS • Target large markets, manufacturing centers, and nations with good enforcement record • First to File (OUS) vs. First to Invent (US)

37. Foreign IP Strategy for Med Tech • Gauge Foreign IP Filing to US/OUS Market Share • i.e. 70/30 US/OUS market split means 70%+ of IP budget should be spent on US prosecution • When you file Foreign IP, file in • Large key market countries (e.g., UK, FR, DE, JP, CA, CH) • Countries with competitor manufacturing facility (e.g., IR) • Country with cross border enforcement (e.g., NE) • File PCT to buy time for market to develop • Claim medical device, not method • Amend claims in foreign cases as US prosecution develops

38. IP Goals for Different Stages • Concept Stage • Protect early concepts • Research IP landscape to be able to address patentability and freedom to operate • Keep good invention records (applies to all stages)

39. IP Goals for Different Stages • Development Stage • Validate patent strategy with an attorney • Develop patentability strategy • Develop freedom to operate position • Enhance portfolio with additional patent filings

40. IP Goals for Different Stages • Clinical Stage • Revisit and refine IP strategies • Plan for litigation (safe harbor during clinical stage) • Establish internal systems (staff, forms, processes) • Consider advanced strategies

41. IP Goals for Different Stages • Commercial Stage • Consider written freedom to operate opinion • The rules for FTO opinions will most likely be changing in the next few years, so keep an eye on patent reform for this • Implement advanced strategies • Continuation Practice • Portfolio Mining • Picket Fencing

42. To Do List – Concept Stage • Prepare detailed invention disclosure • Conduct patentability and infringement searches • File provisional patent application • Recruit patent attorney if funds available • Filing fee < $100 • Simple (not formal application) • Good for only one year • Develop Business Plan • Develop patent strategy – claim commercial differentiators • Develop freedom to operate strategy – distinguish from competitor’s claims or invalidate • Use Confidential Disclosure Agreements (CDA) • Don’t disclose invention unless necessary • File provisional first • VCs and physicians may not sign CDA • Establish funding within 9 months • Significant cost to regularize and foreign file within 1 yr. • Significant cost to establish or endorse patent strategy and freedom to operate strategy

43. To Do List – Development Stage • Recruit patent attorney (if not already) • Review patent filings and fix if necessary • Develop patent portfolio strategy • Develop freedom to operate strategy • Use confidentiality agreements • Use confidentiality and invention assignment provisions in employee and consulting agreements • File new patent applications on improvements

44. To Do List – Clinical and Commercial Stages • Re-visit and refine patent strategy • File new patent applications on improvements • Advanced initiatives • Continuation Practice • Portfolio Mining • Picket Fencing • Plan for litigation • Re-visit and refine freedom to operate strategy, obtain oral opinion • Competitive watch / surveillance • Internal Management • Assign staff (document tracking, docketing, patent searching, portfolio management, patent review board, etc.) • Establish forms and processes (invention disclosure, CDA)

45. Don’t List – Every Stage • Garbage in = garbage out (don’t skimp on using a patent attorney for patent drafting) • Don’t communicate or take notes about freedom to operate issues without presence of attorney (attorney-client privilege) • Horror stories

46. Biographies • Robert E. Atkinson, J.D.is president and patent counsel for Prospex Medical. Bob is a registered patent attorney with significant experience as an entrepreneur (Prospex Medical I & II, SpinaLabs, Aetherworks I & II), as corporate patent counsel (Boston Scientific), as private patent counsel serving a variety of medical device start-ups, and as an engineer (SCIMED), all in the medical device industry. Prospex Medical is an incubator focused on innovating and incubating novel medical technologies. • Brad D. Pedersen, J.D.a partner at Patterson, Thuente, Skaar & Christensen, P.A., received a Bachelor of Science in electrical engineering from South Dakota State University graduating in 1981 and a law degree cum laude from the University of Minnesota in 1986. He has also worked as an attorney for large law firms, Gibson, Dunn & Crutcher in Los Angeles and Dorsey & Whitney in Minneapolis, and was IP counsel for Angeion Corporation, a high-technology medical device company. Brad is experienced in developing patent portfolios and strategies for startup companies and patent portfolio he has developed have resulted in settlements and transactions worth more than $100 Million.