The Nuts & Bolts for Starting Your Business LEGAL ISSUES FOR START-UPS Stradling Yocca Carlson & Rauth, APC 660 Newport Center Drive, Suite 1600 Newport Beach, CA (949) Monique M. Heyninck and Timothy F. O'Brien

Page 2 Intellectual Property includes Patents, Trade Secrets, Trademarks and Copyrights This presentation will focus on Patents and Trade Secrets

Page 3 What is a Trade Secret A trade secret is any confidential information with commercial value, reasonably protected from disclosure by its rightful holder.

Page 4 How to Protect Trade Secrets “Reasonable” measures to safeguard secrecy include: “Confidential” notices Locks, Passwords, ID Badges Non-Disclosure and Confidentiality Agreements Specific procedures and policies

Page 5 Advantages of Trade Secrets Trade secret protection has the advantage of not being limited in time (patents last in general for up to 20 years) and, therefore, may continue indefinitely as long as the secret is not revealed to the public. Trade secrets involve no registration costs (though there may be high costs related to keeping the information confidential). Trade secrets have immediate effect. Trade secret protection does not require compliance with formalities such as disclosure of the information to a Government authority.

Page 6 Disadvantages of Trade Secrets If the secret is embodied in an innovative product, others may be able to inspect it, dissect it and analyze it (i.e., "reverse engineer" it) and discover the secret and be thereafter entitled to use it. Once the secret is made public, anyone may have access to it and use it at will. A trade secret is more difficult to enforce than a patent. A trade secret may be patented by someone else who developed the relevant information by legitimate means.

Page 7 What is a Patent A patent permits its owner to exclude members of the public from making, using, or selling the claimed invention.

Page 8 Patentable Inventions 35 U.S.C. 101: Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title.

Page 9 Why Should you Patent an Invention Exclusive rights - Patents provide the exclusive rights to use and exploit the invention for twenty years from the date of filing of the patent application. Strong market position - Prevent others from commercially using patented invention, thereby reducing competition and establishing market presence. Higher returns on investments – Commercialization of the invention enables higher returns on investments. Opportunity to license or sell the invention - Sell or license the rights to commercialize the invention to another enterprise which will be a source of income. Increase in negotiating power - A patent portfolio will enhance bargaining power if acquiring the rights to use the patents of another enterprise through a licensing contract (e.g., potentially enter into a cross licensing arrangement) Positive image - Business partners, investors and shareholders may perceive patent portfolios as a demonstration of the high level of expertise, specialization and technological capacity which may prove useful for raising funds, finding business partners and raising a company's market value.

Page 10 Overview of the U.S. Patent Process Yes Not Patentable INVENTION Opinion Modify Idea or Get New Idea No File Provisional Patent Within 12 Months RCE Office Action File Response Overcome Do Not Overcome Rejections Appeal, RCE or Give Up Pay Issue Fee Lose Appeal Win Appeal Letters Patent Appeal Pay Maintenance Fees If Non-Provisional based on Provisional, then also must foreign file. Allowance Conduct Patentability Search? Patentable File Provisional or Non-Provisional? File Non-Provisional Patent Communication from USPTO 1 1

Page 11 International Patent Process Separate Applications in Individual Countries Patent Cooperation Treaty (PCT)

Page 12 General Information About the PCT October 27, 2005 – 128 Contracting States (Members) One International Application, One Set of Fees 18 Months from International Application Filing Date (or 30 Months from Priority Application Filing Date)

Page 13 Advantages of PCT Delays National Filings and Related Expenses International Search Report and Written Opinion International Publication puts the World on Notice

Page 14 Useful Links and Handouts United States Patent and Trademark Office (USPTO): World Intellectual Property Organization (WIPO): USPTO Patent and Full Text Image Database: USPTO Patent Application and Full Text Image Database: WIPO Digital Library/Database: European Patent Office (EPO): EPO Database: e?Action=FormGen&Template=ep/en/advanced.hts USPTO Trademark Electronic Search System (TESS): United States Copyright Office: International Trademark Association: Network Solutions (Domain Name Information): Record of Invention and Invention Disclosure Form