HOW CAN THE CHEMIST HELP THE PATENT LAWYER: HOW CHEMISTS AND CHEMICAL ENGINEERS ASSIST IN PATENT LICENSING ACTIVITIES B y E. V. HAINES Esso Research and Engineering Co., Elizabeth, New Jersey
Whether we a r e overjoyed by the thought or not, m o s t of u s , and r e g a r d l e s s of whether we c a l l o u r s e l v e s c h e m i s t s or c h e m i c a l e n g i n e e r s , s o o n e r or l a t e r a r e c a l l e d upon to aid patent a t t o r n e y s in l i c e n s i n g , and other c o n t r a c t u a l , m a t t e r s r e l a t i n g t o p a t e n t s . G e n e r a l l y , the type of information sought by patent a t t o r n e y s f r o m c h e m i c a l l y - t r a i n e d individuals falls into two m a t t e r s r e l a t i n g t o the e c o n o m i c s categories of a p r o c e s s o r composition of m a t t e r , and m a t t e r s r e l a t i n g t o the technology of c o m p o s i tions of m a t t e r o r p r o c e s s e s , In the f i r s t c a t e g o r y , a few g e n e r a l i z a t i o n s will s e r v e t o acquaint you with t h e n a t u r e of the e c o n o m i c s which constitute a patent a t t o r n e y ' s working f a c t s in o r d e r f o r him to intelligently d r a f t a suitable l i c e n s e a g r e e m e n t involving one or m o r e patent a s s e t s , o r , in the c a s e of a pot e n t i a l l i c e n s e e , f o r the patent a t t o r n e y t o i n t e r p r e t intelligently whether o r not the t e r m s offered by a proposed l i c e n s e a r e r e a s o n a b l e , e x o r b i t a n t , or, as s o m e t i m e s m a y be the c a s e , a n outright b a r g a i n . What is the n a t u r e of the thing being lic e n s e d ? What a r e the y i e l d s , p u r i t i e s , r a w m a t e r i a l s c o s t s , and p r o c e s s i n g e f f i c i e n c i e s of the thing being l i c e n s e d v e r s u s the a l r e a d y - e x i s t i n g or competing p r o c e s s e s or compositions ? What Is the p r o d u c t , do the m a r k e t s u r v e y s show c o s t w i s e , going t o be able t o compete s u c c e s s f u l l y with e s t a b l i s h e d p r o d u c t s on the m a r k e t ? It i s , of c o u r s e , a g e n e r a l p r i n c i p l e , in the light of m o d e r n i z e d thinking, = t o charge a s a royalty a l l that the t r a f f i c will b e a r . F r o m a s h o r t - r a n g e standpoint, a high c h a r g e might s e e m t o be a d e s i r a b l e thing. But t h i s only c r e a t e s a s t r o n g incentive not only t o t h e l i c e n s e e , but t o c o m p e t i t o r s , to spend m o n e y , t i m e and e f f o r t t o develop p r o d u c t s o r p r o c e s s e s which will be s u p e r i o r t o the thing patented o r a t l e a s t equal t o i t , and which will avoid i n f r i n g e m e n t of the patent o r patents c a r r y i n g t h e p r o p o s e d high royalty f e e s . It i s , t h e r e f o r e , a r e a s o n a b l e attitude f o r a p r o s p e c t i v e l i c e n s o r , as well as the p r o s p e c t i v e l i c e n s e e , t o know the potential e c o n o m i c s of the thing being l i c e n s e d , placing, as n e a r l y as p o s s i b l e , a value on t h e i m p r o v e m e n t o r the novelty of the patented a r t or composition s o t h a t e a c h p a r t y can judge w h e t h e r o r not he b e l i e v e s t h a t he is r e c e i v i n g a fair s h a r e of the d o l l a r s a v i n g s o r o t h e r benefits r e p r e s e n t e d by the patented p r o c e s s a n d / o r the product o v e r t h o s e old i n t h e a r t . Of c o u r s e , at t h i s j u n c t u r e , s u c h f a c t s and f i g u r e s a r e m e a n i n g l e s s if they a r e m e r e l y g u e s s e s ; and the c h e m i c a l m a r k e t a n a l y s t and
the c h e m i c a l development e n g i n e e r , working as a t e a m , m u s t develop d o l l a r s - a n d - c e n t s f i g u r e s which will be a s r e a l i s t i c as it is possible t o attain. F r o m the technical s i d e of the l i c e n s i n g p r o g r a m , c h e m i s t s and c h e m i c a l e n g i n e e r s a r e of profound h e l p in s e v e r a l ways in negotiating the b u s i n e s s d e c i s i o n s . The f r a m i n g of the definition of the field of the a g r e e m e n t o r the scope of the a g r e e m e n t c a n be a c r i t i c a l p r o b l e m . Such a definition of the f i e l d of the a g r e e m e n t often is couched in highly technical t e r m s . T h i s b e c o m e s a v e r y i m p o r t a n t c o n s i d e r a t i o n in many license agreements, particularly where there a r e g r a n t b a c k p r o v i s i o n s t o the l i c e n s o r by t h e l i c e n s e e . A p r e c i s e definition f r e e f r o m a m b i guity or indefiniteness is a l w a y s d e s i r e d . That i s what is being l i c e n s e d with potential i m p r o v e m e n t s being l i c e n s e d back to the patent h o l d e r by his l i c e n s e e . The drafting of t e c h n i c a l language t o define the f i e l d of a g r e e m e n t w h e r e a g r o u p of p a t e n t s is being l i c e n s e d usually r e q u i r e s c a r e f u l and detailed consultation with c h e m i s t s and c h e m i c a l e n g i n e e r s in o r d e r to find the a p p r o p r i a t e but p r e c i s e language n e c e s s a r y t o c a r r y out the intent of the p a r t i e s . An i n t e r p r e t a t i o n of the language of the c l a i m s , something in which the c h e m i s t alone i s a b l e t o assist the l e g a l t a l e n t , is a l s o n e c e s s a r y i n many i n s t a n c e s . It is n e c e s s a r y , on o c c a s i o n , f o r c h e m i s t s to conduct bench t e s t s to d e t e r m i n e whether or not a l i c e n s e is needed in the f i r s t p l a c e , and the extent t o which s u c h a l i c e n s e m u s t be sought often is d e t e r m i n e d by the t e c h n i c a l f a c t s e l i c i t e d f r o m the c h e m i s t . In o t h e r w o r d s , technical f a c t s m u s t be d e t e r m i n e d i n o r d e r t o guide t h e patent l a w y e r . In m a n y c a s e s , know-how and t e c h n i c a l p r o p r i e t a r y i n f o r m a t i o n coextensive with the f i e l d of the a g r e e m e n t m u s t be exchanged by the p a r t i e s t o the a g t e e m e n t u n d e r the t e r m s of the a g r e e m e n t . What is and what is not p r o p r i e t a r y i n f o r m a t i o n ? T h i s is s o m e t i m e s r e d u c e d to a question of know-how, but, m o r e often t h a n not, confidential p r o p r i e t a r y i n f o r m a t i o n boils down t o t h a t i n f o r m a t i o n which is c o n c e r n e d with the s u b j e c t m a t t e r of the l i c e n s e a g r e e m e n t and which is given by one of t h e p a r t i e s to the l i c e n s e a g r e e m e n t t o the o t h e r p a r t y . T h i s d o e s not m e a n , of c o u r s e , t h a t all s u c h i n f o r m a t i o n is confidential m e r e l y because the p e r s o n handing i t o v e r m a y d e s i g n a t e i t as such. N e v e r t h e l e s s , in the a b s e n c e of the s a m e i n f o r m a t i o n being in t h e public d o m a i n e i t h e r through p r i n t e d public a t i o n s o r i n p a t e n t s , it is u p t o t h e c h e m i s t a n d t h e c h e m i c a l e n g i n e e r t o a d v i s e the patent
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'Presented before the Division of Chemical Literature, ACS National Meeting, New York, September 12, 1960.
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T H E CHEMICAL ENGINEER AND P A T E N T LICENSING
a t t o r n e y and h i s c l i e n t j u s t what they c o n s i d e r t o be t h e e s s e n c e of the p r o p r i e t a r y i n f o r m a t i o n which i s t o be t u r n e d o v e r t o the l i c e n s e e . H e r e , t h e c h e m i s t and c h e m i c a l e n g i n e e r a r e r e l i e d upon, a l m o s t e x c l u s i v e l y , t o guide the c l i e n t and h i s p a t e n t a t t o r n e y . The l i c e n s o r himself m a y not be too c l e a r in h i s u n d e r s t a n d i n g of j u s t what i n f o r m a t i o n he is obligated to f u r n i s h t h e l i c e n s e e and what i n f o r m a t i o n , in t u r n , the l i c e n s e e m a y be obligated t o f u r n i s h the l i c e n s o r , The r e s u l t s of pilotplant s t u d i e s as well as b e n c h - s c a l e s t u d i e s often a r e d e l i v e r e d t o the l i c e n s e e by the l i c e n s o r once the a g r e e m e n t is s i g n e d , f o r the p a r t i e s a r e then engaged i n a "mutual" u n d e r taking, s o t o s p e a k . The c h e m i s t and t h e c h e m i c a l e n g i n e e r art: looked t o , t o f u r n i s h a n e x t r e m e l y valuable s e r v i c e in affording c l e a r d e s c r i p t i o n s and s p e c i f i c a t i o n s of the p r o c e s s and i t s d e s i g n f e a t u r e s . It i s not unusual f o r l i c e n s e a g r e e m e n t s t o contain p e r f o r m a n c e g u a r a n t e e s by the l i c e n s o r
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t o the l i c e n s e e , and i n s e t t i n g t h o s e g u a r a n t e e s t h e c h e m i c a l e n g i n e e r m u s t of n e c e s s i t y a d v i s e h i s p r i n c i p a l , the l i c e n s o r , as t o what m i n i m a the l i c e n s o r should be willing t o s t a n d on a s a g u a r a n t e e t o the l i c e n s e e . The m i n i m a as t o y i e l d , c o s t of p r o d u c t , e f f i c i e n c i e s , can only be s e t with the guidance of t h e c h e m i s t and the chemical engineer. It will be s e e n f r o m t h e s e few r e m a r k s t h a t although t h e r e a r e many ways in which a c h e m i s t o r c h e m i c a l e n g i n e e r c a n and m u s t under p r e s e n t technological p r a c t i c e s a d v i s e t h e patent a t t o r n e y as t o the t e c h n i c a l and e c o n o m i c f a c t s involved i n any p a r t i c u l a r patent s i t u a t i o n , and although the patent a t t o r n e y m u s t of n e c e s s i t y pay c l o s e attention t o t h a t a d v i c e , i t is the patent a t t o r n e y , t h e c l i e n t , the c h e m i s t and c h e m i c a l engineer working a s a t e a m who evolve the b e s t r e s u l t s i n a s i t u a t i o n w h e r e e a c h m e m b e r of the t e a m fully a p p r e c i a t e s and u n d e r s t a n d s the value of h i s contribution t o the c o m m o n e f f o r t of e a c h of t h e o t h e r m e m b e r s of t h a t t e a m .
a.,
