Preparing Your Medical Device NewCo For IP Due Diligence. Presentation available at knobbe.com/octane

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1 Preparing Your Medical Device NewCo For IP Due Diligence Presentation available at knobbe.com/octane OCTANe Medical Device and Investor Forum October 23, 2013

2 The Panel Reza Zadno Venture Partner, InterWest Partners, Menlo Park Visiogen Inc. (Abbott Medical Optics) PercuSurge, Inc. (Medtronic) Spencer Schneider, Esq. IP Counsel, HealthCare Royalty Partners, Stamford CT Dewey & LeBoeuf Ropes & Gray Cooper & Dunham Sabing Lee, Esq., Partner, Knobbe Martens, Irvine IDev (Abbott Vascular) ev3 Inc. (Covidien) Flex-Foot, Inc. (Össur hf) Endius, Inc. (Zimmer) 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 2

3 What is Due Diligence? Buyer/investor Investment in company Acquire company Acquire or license in IP/technology Target Company raising money Company selling or licensing IP/technology Selling the company 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 3

4 Hypothetical Company: LaunchPad NewCo Technology: new intraocular lens invented by UCI professor Market: $3 billion dollars by 2018 Market Participants: Bausch & Lomb, AMO, Alcon FDA clearance expected in 2016 Series A round seeking $5 million 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 4

5 What are investors/ acquirers looking for? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 5

6 Key Issues Ownership (Do you own your IP?) Patent protection (How good are your patents?) Right to practice (Are you going to get sued?) 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 6

7 How does investor/investor counsel approach IP diligence? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 7

8 How Does Investor/Investor Counsel Approach IP Diligence? When do you start? Term sheet Non-disclosure agreements How much to spend? Who pays? How do you obtain information? How long does it take? How risk averse is the investor? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 8

9 How do you prepare a target for diligence? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 9

10 What s Wrong With These Statements? 1. Strong IP portfolio based on innovative University technology 2. Numerous patents filed worldwide 3. Completely novel technology with no competitors, so LaunchPad NewCo has freedom to operate 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 10

11 How Do You Make Yourself Attractive? Consistency with business objectives and revenue model Clear articulation of important patents Clear indication of how patents protect market space Identification and management of third party patent risks 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 11

12 How Do You Prepare Your IP For Diligence? Prepare status reports Check assignments Perform searching Establish patent monitor Have positions ready for problem patents Make sure file histories have been reviewed 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 12

13 How do you eliminate ownership issues? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 13

14 Ownership Checklist Assignments Confirm assignment trails Record assignments Look for potential ownership leaks Prior employment obligations University affiliations Outgoing obligations in NDA and other agreements Licensing relationships Review standard agreements Keep good records of inventions 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 14

15 How do you evaluate the strength of a patent portfolio? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 15

16 What, When and Where? What? Are patents being filed to cover specific products or to exclude competitors? Do pending or issued claims cover markets/competitors of interest? Do patents track with business objectives? Are claims patentable? When? Were patents filed before public disclosures? In view of AIA, are new patents being filed quickly? How old are the patents? Where? Are patents being filed to cover important markets? How do you evaluate patents worldwide? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 16

17 How Can A Target Company Create An Attractive IP Portfolio? Quantity versus quality Issued patents versus pending applications Expedited versus normal examination Maintaining continuations/divisionals 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 17

18 How do you give/obtain comfort on infringement risk? 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 18

19 Managing Infringement Risk Have infringement searching process Periodic searches Monitor key competitors Have a process for screening patents identified in searching and monitoring Record-keeping of the process Process for dealing with problem patents Opinions of counsel Threats of litigation 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 19

20 5 Common IP Diligence Mistakes No claims on what the investor believes to be the invention An employee agreement that does not require assignment of all IP Not preparing adequately as a team to present the company's IP story Holding back bad information Not periodically doing an internal audit 2013 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 20

21 Andrew Douglas Sabing Lee 949/ / Presentation available at knobbe.com/octane

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