The Race for a COVID-19 Vaccine is On: Key Factors May Impact Patent Protection

Posted in Medical Technology, Patent

The search for a vaccine for the COVID-19 strain of coronavirus has put the spotlight once again on the innovative pharmaceuticals sector.  As pharmaceutical companies and innovators across the globe work diligently on a vaccine, many of these companies may be looking to protect their innovation. While patents have many benefits, in the face of a global health emergency, there are some key factors innovators should consider.

Timeline for Patent Registration

Patents can provide broad protection for invention and innovation.  They can also create a significant advantage in the marketplace. However, patent registration takes time and may require significant resources. According to the United States Patent and Trademark Office (USPTO), on average, it takes approximately 22 months to get patent approval.  This period may be shortened by taking advantage of one of the USPTO’s accelerated examination procedures and may be shortened by utilizing the USPTO prioritized examination option, where a final decision on patentability is made within 12 months from the filing date of the patent application. Continue Reading

USPTO Announces Extensions Under CARES Act

Posted in Data Protection, Intellectual Property, Patent, Patent Strategy, Software Patents, Technology, USPTO

On April 28, 2020, the United States Patent and Trademark Office (USPTO) announced a new extension of certain submissions and fees under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This announcement supersedes the previously announced extensions of March 31, 2020, and the notice of March 16, 2020.

Read the full GT Alert here: “USPTO Announces Extensions Under CARES Act.”

CARES Act Considerations for Emerging Tech Companies

Posted in Employers, Technology

On March 28, 2020, President Trump signed into law a historic $2.2 trillion stimulus package, namely, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, in response to the novel Coronavirus Disease 2019 (COVID-19) pandemic. This is the largest emergency aid package in U.S. history, offering economic relief to companies and their employees.

The new law expands the Economic Injury Disaster Loan Program (EIDL) and establishes the Paycheck Protection Program (PPP). Both programs operate under the oversight of the Small Business Administration (SBA). For a detailed overview of the CARES Act, please read GT’s Alert, “Congress Passes CARES Act: Overview of the Relief Available to Small and Other Business Concerns.”

Many of the CARES Act provisions impact the emerging technology sector. Below, we outline some programs and other considerations that apply to emerging technology companies.

SBA Paycheck Protection Program (PPP) Loans

Generally, the CARES Act allocates $349 billion for low interest, no-fee loans equal to the lesser of $10 million and 2.5 times the borrower’s monthly U.S. payroll costs as measured over the prior 12 months loans may be partially forgiven in certain circumstances. PPP is generally limited to “small business concerns” with fewer than 500 employees.

SBA Economic Injury Disaster Loans (EIDL)

The CARES Act expands the existing SBA EIDL program under Section 7(b)(2) and allocates $10 billion for related SBA grants.

Recipients may receive up to $2 million in loans for working capital and ordinary expenditures based on economic injury from COVID-19 and should apply directly with the SBA. EIDL applicants may be eligible for Emergency IDL Grants up to $10,000.

Compliance with SBA Affiliation Rules

Small business concerns must satisfy the affiliation rules under the SBA, which may make eligibility difficult for early-stage companies due to the aggregation requirements.

The general rules governing the SBA’s interpretation of “affiliation” can be found in 13 C.F.R. Section 121.103 and in the SBA Small Business Compliance Guide: Size and Affiliation – A Guide to the SBA’s Size Program and Affiliation Rules.

However, application of the affiliation rules to the PPP and EIDL loans are subject, instead, to 13 C.F.R. Section 121.301 and recent guidance from the U.S. Department of the Treasury (Treasury), which narrows the general affiliation concepts by eliminating, in relevant part, the “totality of circumstances” test and limiting the identity of interest test.

There are certain waivers from the affiliation rules for (i) any business concern that is assigned a North American Industry Classification System (NAICS) code beginning with 72 (generally, hospitality and restaurant businesses), (ii) any business concern operating as a franchise that is assigned a franchise identification code by the SBA, and (iii) any business concern that receives financial assistance from an company licensed under section 301 of the Small Business Investment Act of 1958 (15 U.S.C. 681), that is a Small Business Investment Company.

Despite this limited relief, significant uncertainty remains as to the application of particular provisions of Section 121.301, subpart (f), for venture-backed companies. Numerous technology trade associations, including the National Venture Capital Association (NVCA), have written a letter to the Treasury and SBA requesting further relief from the affiliation rules in connection with the stimulus programs.

Unless the concerns around the affiliation rules are addressed, many tech startups, including those in the life sciences, may not be able to benefit from relief provided by the CARES Act.

Considering the ongoing COVID-19 pandemic and the heightened demand on SBA lenders, potential borrowers may wish to contact their SBA lender as soon as possible to help determine eligibility.

For more information and updates on the developing COVID-19 situation, visit GT’s Health Emergency Preparedness Task Force: Coronavirus Disease 2019.

USPTO Announces Possible Extensions Under CARES Act

Posted in Patent, Patent Strategy, USPTO

On March 31, 2020, the United States Patent and Trademark Office (USPTO) announced extension of certain submissions and fees under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as signed by President Trump on March 27.

If the following three steps are met, then the USPTO shall provide a 30-day extension of time.

STEP 1             Are you affected by the COVID-19 outbreak?

STEP 2             When is the submission or fee due?

STEP 3             What is the submission or fee that is due?

Please note that the USPTO provides for other situations to be considered as well (i.e., the relief under the CARES Act is not necessarily limited only to the steps detailed below).

STEP 1             Are you affected by the COVID-19 outbreak?

Is “a person associated with the filing or payment of fee” to the USPTO “personally affected by the COVID-19 outbreak”?

  • Examples of “person associated” include, but is not limited to, the following: the patent attorney, the patent agent, the applicant, the patent owner, the third-party requester, the inventor, etc.
  • Examples of “personally affected include, but is not limited to, the following: office closures, cash flow interruptions, inaccessibility of files, travel delays, personal or family illness, etc.

If the answer to STEP 1 is YES, then proceed to STEP 2.

STEP 2             When is the submission or fee due?

Is there a submission or a fee that is due for a patent application or a patent at the USPTO from March 27, 2020, to April 30, 2020?

If the answer to STEP 2 is NO, then you do not qualify for the time extension under the CARES Act (as notified by the USPTO on March 31, 2020).

If the answer to STEP 2 is YES, then proceed to STEP 3.

STEP 3             What is the submission or fee that is due?

For all entity types of applicants and patent owners, the following submission and fee qualify for the relief:

1. Reply to an Office notice or action issued during examination or patent publication processing;

2. Payment of issue fee;

3. Notice of appeal;

4. Appeal brief;

5. Reply brief;

6. Appeal forwarding fee;

7. Request for an oral hearing before the PTAB;

8. Response to a substitute examiner’s answer;

9. Amendment when reopening prosecution in response to, or request for rehearing of, a PTAB decision designated as including a new ground of rejection; or

10. Request for rehearing of a PTAB decision.

Additionally, if the applicant or the patent owner is a small or micro entity, the following submission and fee also qualify for the relief:

  1. Reply to an Office notice issued during pre-examination processing by the USPTO; or
  2. Maintenance fee.

If any of the answers to STEPS 1-3 above is NO, you may still qualify for the 30-day extension of time under the CARES Act. For example, in PTAB proceedings, a request for an extension of time where the COVID-19 outbreak has prevented or interfered with a filing can still be made by contacting the PTAB directly.

 

Could Star Trek’s DATA Be a Patent Inventor?

Posted in Artificial Intelligence, Patent, Patent Strategy, Software Patents, Technology

Most of us know that DATA, the beloved android from Star Trek, The Next Generation, is an artificial intelligence (AI) life form from the distant future with a high capacity to problem solve and innovate. But, if DATA were present today and invented a new technology, could he be an inventor on a patent for his invention?

The question of whether AI can legally be an inventor on a patent was recently addressed by the European Patent Office (EPO) and The United Kingdom Intellectual Property Office (UKIPO). The same question is still being evaluated by U.S. Patent and Trademark Office (USPTO) along with solicitation for comments to the patent community. Continue Reading

Hong Kong Original Grant Patent (OGP) System to Launch Dec. 19

Posted in Intellectual Property, Patent

On Dec. 19, 2019, the Original Grant Patent (OGP) system will launch in Hong Kong Special Administrative Region (SAR). This new system will provide patent applicants an alternate path for seeking patent protection in Hong Kong SAR. The OGP system is a parallel process. The previously available routes for filing a patent application are still available. Accordingly, starting on Dec. 19, 2019, there will be five different routes to file a patent application in Hong Kong SAR.

Click here to read the full GT Alert “Hong Kong Original Grant Patent (OGP) System to Launch Dec. 19.”

Singapore’s Revised Patent System Starts Jan. 1, 2020

Posted in Patent, Patent Strategy

The patent system in Singapore makes a revolutionary change starting Jan. 1, 2020.

Patent applications filed in Singapore on or before Dec. 31, 2019, can still enjoy the current supplementary examination process (also known as the “foreign route”), if the applicant chooses. For these applications, there will be no substantive local examination, even if the examination starts after the new year.

Read the full GT Alert, which discusses the present “foreign route” system, the revised system, and some additional considerations.

A Non-Compete Law Roadmap for Tech Start-Ups in Key Jurisdictions

Posted in Employers, GT Alert, non-competition agreements, Start-up, Trade Secrets, Uncategorized

The enforceability of restrictive covenants, particularly non-compete agreements, can be very difficult for employers to navigate, especially for companies in their “start-up” phase. Technology companies in particular face challenges in structuring non-competes that balance their need to attract talent with their need to protect confidential and sensitive information, while preventing unfair competition by former employees. Many states have developed common law precedent as to what constitutes a permissible non-compete, while others have enacted statutes. Emerging technology companies must be aware of the laws in their jurisdictions in order to draft enforceable restrictive covenants that adequately protect business needs. The below chart presents a summary of employee non-competition laws and applicable standards in four states where emerging technology companies often do business: California, Massachusetts, New York, and Texas.

Topic CA MA NY TX
Statutes/ regulations governing non-competes Sections 16600 to 16607 of the California Business and Professions Code govern non-competes. Massachusetts Noncompetition Agreement, Act, M.G.L. c. 149, § 24L (effective for agreements made on or after Oct. 1, 2018). No statute or regulation governing non-competes generally. Texas Covenants Not to Compete Act, Tex Bus. & Com. Code Ann. §§ 15.50 to 15.52.
Essential Elements Post-employment non-compete agreements are unlawful except in the context of a sale of a business.

To be valid and enforceable, a non-compete agreement must:

-be in writing and signed by both the employer and employee;

-expressly state that the employee may consult with an attorney before signing;

-be provided, if made before employment begins, to the employee by the earlier of either: (a) formal offer of employment; or (b) at least 10 business days before employment begins;

-be supported, if made after employment begins but not in connection with termination of employment, by fair and reasonable consideration independent from continued employment; and provided to the employee at least 10 business before agreement is effective;

-be no broader than necessary to protect the following legitimate interests of the employer: (a) trade secrets; (b) confidential information that is not a trade secret; or (c) the employer’s goodwill.

New York common law disfavors non-compete agreements as an unreasonable restraint of trade.

Courts may enforce a non-compete if the restriction is reasonable. Although courts evaluate non-competes on a case-by-case basis, a non-compete can be enforced only if it:

-is no greater than required to protect an employer’s legitimate protectable interests;

-does not impose undue hardship on the employee;

-does not cause injury to the public;

-is reasonable in: duration; and geographic scope

New York courts have recognized the following protectable interests that may be sufficient to support a reasonable non-compete:

-employer’s trade secrets or confidential information;

-employer’s goodwill;

-employer’s interest in preventing loss to a competitor of an employee whose services are special, unique, or extraordinary.

To be enforceable under Texas law, a non-compete must:

-be ancillary to or part of an otherwise enforceable agreement when the agreement is made;

-be reasonable concerning time, geographical area, and scope of activity to be restrained;

-impose no greater restraint than necessary to protect the employer’s (or promisee’s) goodwill or other business interest.

 

Burden of Proof Plaintiff-former employer bears the burden of proving that a statutory exception applies to the general rule prohibiting non-compete agreements. Employer has the burden of proof to enforce a non-compete.

Party seeking enforcement of the non-compete (typically, the employer) has the burden of proof.

 

If primary purpose of the ancillary agreement is to obligate the employee to provide personal services, the employer has the burden of proof to show that the covenant is reasonable.
Circumstances of Departure Relevant Does not matter whether employer or employee terminates the relationship. Post-employment non-competes are unenforceable in California unless a narrow exception applies.

Employers may not enforce non-compete agreements entered into on or after Oct. 1, 2018, against employees who have been:

-terminated without cause;

-laid off.

 

While NY courts are not entirely in agreement regarding whether non-compete agreements are enforceable against employees who have been terminated by the employer without cause, an increasing number of cases seem to find that they are not enforceable under those circumstances.

If the termination constitutes a breach of contract by an employer, any post-employment non-compete in that agreement cannot be enforced by the breaching employer.

Unless non-compete says otherwise, whether employee terminated or voluntarily departed is not-relevant.
Consideration Not applicable, as non-competes are not enforceable in California and are void against public policy, unless narrow exception applies.

Massachusetts courts have determined that the employment relationship itself is sufficient consideration for a non-compete agreement signed at the beginning of the employment relationship.

For agreements signed after hire, continued employment is not sufficient consideration as required under the Massachusetts Noncompetition Agreement Act.

Initial employment, and under certain circumstances, continued employment, suffices.

Payments to the employee.

Intangibles, including the employee’s receipt of increased:

-knowledge;

-skill; or

-professional status.

To be considered sufficient in Texas, consideration must give rise to the employer’s interest in restraining the employee from competing, and the covenant must be designed to enforce the employer’s consideration or return promise.
Time Range Not applicable, as non-competes are not enforceable in California and are void against public policy, unless narrow exception applies.

Massachusetts Noncompetition Agreement Act prohibits a restricted period of longer than one year from the date the employment ends. A restricted period may extend to a maximum of two years only if the employee:

-breached her fiduciary duty to the employer; or

-has unlawfully taken the employer’s property, either physically or electronically.

Courts have repeatedly held that six months or less is reasonable.

Courts have found longer restrictions to be either reasonable or unreasonable depending on facts of particular case.

 

Time restrictions ranging from two to five years have repeatedly been enforced in non-competes.
Geographic Restrictions (or other scope of enforcement) Not applicable, as non-competes are not enforceable in California and are void against public policy, unless narrow exception applies.

Under the Massachusetts Noncompetition Agreement Act, a geographic restriction is presumed reasonable when the reach is limited to regions where, for the last two years of employment, the employee:

-provided services;

-had a material presence of influence.

When determining whether a non-compete is reasonable in its geographic reach, New York courts focus on the facts and circumstances of each case.

Limitations based on the former employee’s territory during employment are valid.

Another approach, applicable in some circumstances, is to limit the geographic restriction to the area of the employer’s operations.

Click here to read the full GT Alert, “A Non-Compete Law Roadmap for Tech Start-Ups in Key Jurisdictions.”

IRS Clarifies U.S. Tax Treatment of Cross-Border Cloud and Other Online Transactions in Proposed Regulations

Posted in Cloud Computing, GT Alert

On Aug. 9, 2019, the IRS issued proposed regulations (Proposed Regulations) addressing the U.S. federal income tax treatment of cross-border cloud transactions. The Proposed Regulations will not become effective until final rules are adopted.

By way of background, the last time the IRS meaningfully addressed the taxation of cross-border digital content transfers was in October 1998 (1998 Regulations), which applied to software transfers.

Technological developments over the last twenty years – specifically the advent of cloud computing and streaming content – rendered the 1998 Regulations outdated. The IRS stated that the purpose of the Proposed Regulations is to bring IRS regulations current with such technological advancements.

The Proposed Regulations cover, for the first time, transactions involving:

  • Certain on-demand network-access transactions (Cloud Transactions) that include:
    • On-demand network access to “computing resources” such as software, networks, databases, servers, and other technological resources. Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) transactions fall into this category;
    • On-demand network access to “technological resources” such as streaming music and videos, transactions involving mobile development applications (apps), and access to data through remotely hosted software; and
  • The transfer of other digital content (Digital Content Transfers). The transfer of books, movies, and music in digital format for storage and use on a person’s computer or other electronic device falls into this category.

Click here for the full GT Alert.

Cryptocurrencies and Unclaimed Property: Potential Implications of State Escheat Laws for the Blockchain Technology Industry

Posted in cryptocurrency, Cybersecurity, Data Protection, GT Alert, Privacy and Data Security

This GT Advisory considers the application of state unclaimed property laws to cryptocurrencies, and the potential implications and challenges of such application for both industry participants and state unclaimed property administrators.

The use of blockchain technology and the issuance of cryptocurrencies have grown considerably in recent years, inviting heightened scrutiny and regulation. While federal securities, tax, and other financial services regulatory agencies, such as the SEC, the IRS, state securities commissioners and others, have begun applying their rules and regulations to cryptocurrency businesses, the cryptocurrency industry has not yet faced significant enforcement from state unclaimed property administrators.

To read the full GT Alert, click here.

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