Atabak Royaee and Toby Kusmer06.02.10
In the current economic downturn, many companies, including medical device firms, increasingly turn to outsourcing as a management tool to access resources without the need for initial investment or the retention of specialized expertise, control costs and increase efficiency. Outsourcing, however, can be a risky proposition, particularly with respect to intellectual property (IP) rights that may be lost or misappropriated in the process. Thus, it becomes extremely important for OEMs as outsourcers, and contract manufacturers (CMs) as service providers, to know about the kind of IP issues that may arise in an outsourcing transaction and be prepared to address these issues during their contract negotiations.
Medical devices by their nature often belong to the category of “hybrid technology,” encompassing many, if not all categories, of IP (i.e., patents, trademarks, copyrights and trade secrets). Each IP category provides a set of property rights to which the owner is entitled to by law. Each of these underlying property rights can independently be sold or licensed in whole or in part by contract. Due to the unique nature of each outsourcing transaction and specific intellectual property rights that may be involved, an outsourcing agreement has to be drafted with great care and foresight to ensure that each underlying IP right is properly allocated, managed and protected by the parties involved. The following summary provides some information about each of the main IP categories, the underlying rights and a few of the potential issues that may arise in medical device manufacturing outsourcing. While every relationship has its unique issues and concerns, the following discussion relates to common issues and concerns that may come up in connection with outsourcing relationships.
Before delving further into this discussion, it is critical to note, however, that not all countries provide adequate protection for all categories of IP. Even if a country provides some protection for an IP category, it may not be equivalent to the level of protection offered in the United States. Therefore, firms should be aware of what type of IP protection is available in various countries. In countries where IP protection is inadequate or non-existent, device manufacturers must seek to fill the gap by contacts that lay out parties’ expectations and establish contract rights that make up for the inadequate IP protection. For example, in countries where third-party rights are not recognized, OEMs must protect their IP by securing additional contracts directly with CM’s subcontractors or even CM’s employees. It is a good idea for device firms to seek the advice of a local counsel in countries where they plan to outsource their technology.
Patents Defined
A patent provides a number of exclusionary rights for 20 years from the filing date of the patent application. The underlying rights provided by a patent include the right to exclude others from making, using, selling, offering for sale or importing what is claimed in the patent (e.g., a design, product, machine, manufacture, process, method or system). Therefore, anyone other than the patent owner who wishes to practice the claimed invention must first obtain a license from the owner or patentee. It must be noted, though, that patent rights are territorial. This means that a U.S. patent is not enforceable in other countries, and patents obtained in other countries are not enforceable in the United States. A major issue in the area of medical device outsourcing is the question of ownership of patentable technology relating to improvements to existing IP created by either or both parties during the performance of the outsourcing contract. Should the CM, OEM or both own the patent? The answer may depend on many factors including, for example, which party contributed the most to the conception of the idea; which party’s existing technology is more closely related to the subject matter of the latest developed technology; or which party provided the funding or resources needed for the discovery. Unfortunately, in many cases, it is extremely difficult to determine who should own the right to the improvement technology in the context of an outsourcing transaction. The patent statutes in the United States do not require co-inventors to contribute equally to conception of an invention; nor do they require co-inventors to work in one physical location for an invention to be owned jointly. Therefore, it might then be logical to expect parties in an outsourcing transaction to jointly own the right to improvements.
However, no matter how logical or fair it may sound, joint ownership should be avoided, because it creates more problems than it solves, especially in the realm of medical device manufacturing. Under U.S. patent law, each co-owner or co-inventor has an undivided right to practice or license the invention independent of the other co-owner(s) and without their consent in the absence of an agreement to the contrary. Yet, for enforcement purposes, co-owner(s) must join in a suit to enforce the patent. Therefore, on the one hand, nothing can stop a co-owner from licensing the patent to a competitor OEM or CM. On the other hand, a co-owner will have to be at the mercy of the other co-owner to sue an infringer because the other co-owner, for various reasons, may or may not be willing to join in a lawsuit against an infringer.
The best way to resolve issues associated with ownership of an improvement technology may be to allocate ownership rights to one party, either the CM or the OEM, and issue the other party a license with relatively favorable terms (note, however, that a license still may create a joinder issue in connection with any lawsuits that may be subsequently filed to enforce the IP in question against other third parties). For example, the outsourcing agreement can expressly require the CM to assign its rights to any improvement technology to the OEM and require the OEM to license the technology to the CM. Obviously, if the improvement technology is closer to the OEM’s patented technology, the ownership rights should go to the OEM. However, if the improvement technology is closer to the CM’s “tool kit” technology, then perhaps the ownership should go to the CM. In many cases, it is more beneficial for OEMs to be named as owners of the improvement technology because they will then have more freedom to switch CMs, especially when the quality of the devices produced are at stake; whereas if CMs are named as owners of the improvement technology, they may use their patent rights as leverage to prevent the OEMs from switching to other CMs.
To make it attractive and encouraging for a CM to accept a license in place of the right to own an improvement patent, parties can agree to provide the CM a non-exclusive, royalty-free license with a scope that is broad enough to allow the CM to use the technology even after the termination of the outsourcing contract. In return, the OEM should obtain a covenant-not-to-sue provision from the CM, under which the CM agrees not to sue the OEM if the OEM were to switch to another outsourcing provider.
Finally, it must be noted that under U.S. patent laws, a proper patent ownership transfer requires a proper chain of title starting with the inventor(s) and ending with the true assignee. Since the CM employees may have invented the improvement technology during their contract tenure, the outsourcing agreement must require the CM to have these employees assign their rights to the CM, in addition to requiring the CM to assign its rights to the OEM.
Patent licensing is another category in which potential issues or disputes may arise if parties are not careful in obtaining the necessary licenses or applying proper limitations on the scope of the licenses necessary for conducting outsourcing.
In many cases, either the OEM or the CM—or both—may have one or more existing patents that need to be licensed to facilitate the outsourcing relationship. Still, in other cases, a license from a third party patentee may have been obtained to facilitate the outsourcing contract.
Extra care must be exercised vis-à-vis freedom-to-operate/non-infringement searches to first identify the third party patent and then approach the owner for a license. If one of the parties, either the OEM or the CM, already has a license to the technology used in the outsourcing transaction, the license must be reviewed to ensure that it is sub-licensable to the other party. In the absence of a sublicensing clause, the party without a license will run the risk of infringing the third-party patent. To avoid an infringement action, a new license will have to be obtained from the third-party patentee in which direct licensing or sublicensing is provided for the partner in outsourcing.
In cases where either the OEM or CM is the patentee of the technology that is used for producing the outsourced device, a license from the patentee to the other party will pave the way for the production and transfer of the outsourced device from one party to the other. In cases where both OEM and CM own patents that relate to their outsourcing relationship, cross-licensing will allow the outsourcing endeavor to move forward. These types of licenses are straightforward. It is worth mentioning that the scope of such licenses must be tailored precisely to accommodate the outsourcing relationship and nothing more. For example, a general unrestrictive license to a CM for practicing a patent to a medical device or a component thereof for the duration of the outsourcing could technically give the CM not only the right to make the licensed product, but also to use, sell, offer for sale, and even import the licensed product (which may not exactly be what the OEM expected). To avoid these kinds of problems, a licensor has to think in terms of the underlying patent rights and limit the scope of the license to only the rights (e.g., right to only “make” or “use” the widget) that the other party needs to carry out its obligations. An IP licensor also must be mindful of not imposing over-reaching restrictions in a license, which may be interpreted as fraud, patent misuse or antitrust violation.
Trademarks and Trade Dress
Under the Federal Trademark Act (15 U.S.C. § 1127), the term trademark includes “... any word, name, symbol, or device or any combination thereof … used by a person … to identify and distinguish his or her goods from those manufactured or sold by others and to indicate the source of goods …”
A number of trademark issues can arise in the context of medical device outsourcing. One such issue relates to the quality of the goods and/or services by the CM, where poor quality of such goods and/or services potentially may damage the OEM’s good will and reputation and weaken the value of its trademark; and, most importantly, cause problems with meeting regulatory requirements associated with the medical device. To prevent any potential damages to the OEM’s mark, the outsourcing agreement must contain detailed quality control provisions that lay out the OEM’s expectations and the CM’s compliance with any regulatory requirements.
Another trademark issue that often arises when the CM is located in another country is where the CM registers an OEM’s trademark in its own name in a foreign country. In this situation, once the outsourcing contract is complete, or the relationship between the parties terminate, the OEM may not be able to use its mark in that country because it already has been registered to someone else. To avoid this scenario, the outsourcing agreement should include provisions that specifically provide that any registration of the OEM’s trademarks by the CM shall be on behalf of the OEM, such registrations shall be owned by the OEM, and that any use of the marks shall inure to the benefit of the OEM.
Ancillary considerations similar to trademark issues include rights in any trade dress, which can provide similar proprietary rights in the manner in which a product’s characteristics in its visual appearance or its packaging that signify the source or original of the product to consumers.
Copyright Concerns
Under the Copyright Act (17 U.S.C. § 102(a)), copyright protection extends to “original work of authorship fixed in any tangible medium of expression ... from which they can be perceived, reproduced, or otherwise communicated directly or with aid of a machine or device.”
Medical devices often include features such as software that are copyrightable. Copyright laws give the owner of a copyrighted work a number of exclusive underlying rights, which include the right to reproduce the copyrighted work; right to prepare derivative works; right to distribute copies, sales, rental, lease or lending of the copyrighted work; and right to display the copyrighted work. Each right can be independently owned, licensed or infringed.
Where software is embedded in the medical device, one copyright issue that relates to medical device outsourcing may be the protection of that software, particularly when the development of the software is being outsourced. To protect a copyrighted work, the outsourcing contract must specify the underlying rights that are bargained for among the parties. The confidentiality provisions of the agreement further must ensure that the confidential information owned by the OEM is protected while the CM is given adequate access during the outsourcing contract.
Another copyright-related issue in outsourcing is the question of ownership of a copyrightable work. According to the U.S. copyright laws, the author of a work of art is the automatic owner the moment he or she affixes such work to a tangible medium of expression. Under the doctrine of “work made for hire,” however, an employer may become the owner of a copyrightable work created by an employee. When outsourced, an OEM must establish by written agreement that the software being developed by the other party is a work made for hire, and include a provision requiring that all software developed under the agreement is being assigned. In such a case, if an employee of the CM develops software for the OEM’s device, the CM will become the owner of that software, not the OEM. As mentioned earlier, however, it is more beneficial for the OEM to own all the IP because it will have more flexibility to switch CMs, if necessary to comply with regulatory laws.
Thus, the best way for the OEM to own a copyrighted work developed by a CM may be to include a copyright assignment clause in the outsourcing agreement that would require the CM to transfer the ownership rights of a copyrighted work to the OEM while retaining some residual rights to complete the outsourcing contract.
Keeping Trade Secrets
Trade secret laws protect many different forms of intellectual property including idea, information and know-how that may or may not be copyrightable or patentable. The Uniform Trade Secret Act § 1(4) adopted in most states defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value ... and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Unlike the United States, many countries around the world do not provide any protection for trade secrets.
In the United States, a trade secret owner has the exclusive right to use the trade secret to derive economic benefit as long as it remains a secret. Once a trade secret is lost through independent discovery or legitimate means, such as reverse engineering or the information becoming public knowledge, it is lost forever. One way to protect trade secrets associated with medical devices in an outsourcing transaction is by establishing strict confidentiality rules via the outsourcing agreement. Such confidentiality provisions must require the CM’s employees, who will have access to the OEM’s confidential information, to sign a confidentiality agreement with the OEM making them personally liable for disclosure of any such information to unauthorized parties.
Other means of protecting trade secrets can be achieved by way of non-competition agreements, and non-solicitation agreements between OEMs or CMs and their employees. A non-disclosure agreement protects trade secrets against improper disclosure or use by employees, former employees and independent contractors. A non-competition agreement will forbid an employee from working at the same capacity for a competitor for a specified period of time in a specified geographical region. A non-solicitation agreement will prevent the ex-employees to solicit other employees to join them in competing with the OEM or CM. All of these contractual agreements, however, are subject to limitations imposed by state laws, which are heavily based on public policy and individual rights.
Due to the unique nature of the medical device outsourcing transactions and the intellectual property rights involved, as a general rule, parties engaged in an outsourcing agreement should not rely on boilerplate contractual provisions for protection of IP. Instead, parties must draft and negotiate their IP-related concerns based on their particular needs and IP rights. Finally, to be more effective in protecting IP rights, parties must be able to identify the categories of IP they own, distinguish them from those of the other party or a third party and carefully address their expectations for each of the underlying rights associated with each IP category by way of negotiation and through the outsourcing agreement.
Atabak Royaee, Ph.D., is a patent agent and science advisor in the area of life sciences at the international law firm of McDermott Will & Emery LLP and is based in the firm’s Boston, Mass., office. He focuses his practice on prosecution of biomedical patent applications. He also provides attorneys with technical assistance in licensing and transactional due diligence matters. Atabak currently is a third-year law student at Suffolk University Law School in Boston.
Toby H. Kusmer, PC, is a senior partner at McDermott Will & Emery LLP, and also is based in the firm’s Boston office. He focuses his practice on all aspects of intellectual property law, both U.S. and international, including ex parte and inter partes matters such as patent and trademark prosecution, opinions, licensing and contract work and related counseling and litigation.
Medical devices by their nature often belong to the category of “hybrid technology,” encompassing many, if not all categories, of IP (i.e., patents, trademarks, copyrights and trade secrets). Each IP category provides a set of property rights to which the owner is entitled to by law. Each of these underlying property rights can independently be sold or licensed in whole or in part by contract. Due to the unique nature of each outsourcing transaction and specific intellectual property rights that may be involved, an outsourcing agreement has to be drafted with great care and foresight to ensure that each underlying IP right is properly allocated, managed and protected by the parties involved. The following summary provides some information about each of the main IP categories, the underlying rights and a few of the potential issues that may arise in medical device manufacturing outsourcing. While every relationship has its unique issues and concerns, the following discussion relates to common issues and concerns that may come up in connection with outsourcing relationships.
Before delving further into this discussion, it is critical to note, however, that not all countries provide adequate protection for all categories of IP. Even if a country provides some protection for an IP category, it may not be equivalent to the level of protection offered in the United States. Therefore, firms should be aware of what type of IP protection is available in various countries. In countries where IP protection is inadequate or non-existent, device manufacturers must seek to fill the gap by contacts that lay out parties’ expectations and establish contract rights that make up for the inadequate IP protection. For example, in countries where third-party rights are not recognized, OEMs must protect their IP by securing additional contracts directly with CM’s subcontractors or even CM’s employees. It is a good idea for device firms to seek the advice of a local counsel in countries where they plan to outsource their technology.
Patents Defined
A patent provides a number of exclusionary rights for 20 years from the filing date of the patent application. The underlying rights provided by a patent include the right to exclude others from making, using, selling, offering for sale or importing what is claimed in the patent (e.g., a design, product, machine, manufacture, process, method or system). Therefore, anyone other than the patent owner who wishes to practice the claimed invention must first obtain a license from the owner or patentee. It must be noted, though, that patent rights are territorial. This means that a U.S. patent is not enforceable in other countries, and patents obtained in other countries are not enforceable in the United States. A major issue in the area of medical device outsourcing is the question of ownership of patentable technology relating to improvements to existing IP created by either or both parties during the performance of the outsourcing contract. Should the CM, OEM or both own the patent? The answer may depend on many factors including, for example, which party contributed the most to the conception of the idea; which party’s existing technology is more closely related to the subject matter of the latest developed technology; or which party provided the funding or resources needed for the discovery. Unfortunately, in many cases, it is extremely difficult to determine who should own the right to the improvement technology in the context of an outsourcing transaction. The patent statutes in the United States do not require co-inventors to contribute equally to conception of an invention; nor do they require co-inventors to work in one physical location for an invention to be owned jointly. Therefore, it might then be logical to expect parties in an outsourcing transaction to jointly own the right to improvements.
However, no matter how logical or fair it may sound, joint ownership should be avoided, because it creates more problems than it solves, especially in the realm of medical device manufacturing. Under U.S. patent law, each co-owner or co-inventor has an undivided right to practice or license the invention independent of the other co-owner(s) and without their consent in the absence of an agreement to the contrary. Yet, for enforcement purposes, co-owner(s) must join in a suit to enforce the patent. Therefore, on the one hand, nothing can stop a co-owner from licensing the patent to a competitor OEM or CM. On the other hand, a co-owner will have to be at the mercy of the other co-owner to sue an infringer because the other co-owner, for various reasons, may or may not be willing to join in a lawsuit against an infringer.
The best way to resolve issues associated with ownership of an improvement technology may be to allocate ownership rights to one party, either the CM or the OEM, and issue the other party a license with relatively favorable terms (note, however, that a license still may create a joinder issue in connection with any lawsuits that may be subsequently filed to enforce the IP in question against other third parties). For example, the outsourcing agreement can expressly require the CM to assign its rights to any improvement technology to the OEM and require the OEM to license the technology to the CM. Obviously, if the improvement technology is closer to the OEM’s patented technology, the ownership rights should go to the OEM. However, if the improvement technology is closer to the CM’s “tool kit” technology, then perhaps the ownership should go to the CM. In many cases, it is more beneficial for OEMs to be named as owners of the improvement technology because they will then have more freedom to switch CMs, especially when the quality of the devices produced are at stake; whereas if CMs are named as owners of the improvement technology, they may use their patent rights as leverage to prevent the OEMs from switching to other CMs.
To make it attractive and encouraging for a CM to accept a license in place of the right to own an improvement patent, parties can agree to provide the CM a non-exclusive, royalty-free license with a scope that is broad enough to allow the CM to use the technology even after the termination of the outsourcing contract. In return, the OEM should obtain a covenant-not-to-sue provision from the CM, under which the CM agrees not to sue the OEM if the OEM were to switch to another outsourcing provider.
Finally, it must be noted that under U.S. patent laws, a proper patent ownership transfer requires a proper chain of title starting with the inventor(s) and ending with the true assignee. Since the CM employees may have invented the improvement technology during their contract tenure, the outsourcing agreement must require the CM to have these employees assign their rights to the CM, in addition to requiring the CM to assign its rights to the OEM.
Patent licensing is another category in which potential issues or disputes may arise if parties are not careful in obtaining the necessary licenses or applying proper limitations on the scope of the licenses necessary for conducting outsourcing.
In many cases, either the OEM or the CM—or both—may have one or more existing patents that need to be licensed to facilitate the outsourcing relationship. Still, in other cases, a license from a third party patentee may have been obtained to facilitate the outsourcing contract.
Extra care must be exercised vis-à-vis freedom-to-operate/non-infringement searches to first identify the third party patent and then approach the owner for a license. If one of the parties, either the OEM or the CM, already has a license to the technology used in the outsourcing transaction, the license must be reviewed to ensure that it is sub-licensable to the other party. In the absence of a sublicensing clause, the party without a license will run the risk of infringing the third-party patent. To avoid an infringement action, a new license will have to be obtained from the third-party patentee in which direct licensing or sublicensing is provided for the partner in outsourcing.
In cases where either the OEM or CM is the patentee of the technology that is used for producing the outsourced device, a license from the patentee to the other party will pave the way for the production and transfer of the outsourced device from one party to the other. In cases where both OEM and CM own patents that relate to their outsourcing relationship, cross-licensing will allow the outsourcing endeavor to move forward. These types of licenses are straightforward. It is worth mentioning that the scope of such licenses must be tailored precisely to accommodate the outsourcing relationship and nothing more. For example, a general unrestrictive license to a CM for practicing a patent to a medical device or a component thereof for the duration of the outsourcing could technically give the CM not only the right to make the licensed product, but also to use, sell, offer for sale, and even import the licensed product (which may not exactly be what the OEM expected). To avoid these kinds of problems, a licensor has to think in terms of the underlying patent rights and limit the scope of the license to only the rights (e.g., right to only “make” or “use” the widget) that the other party needs to carry out its obligations. An IP licensor also must be mindful of not imposing over-reaching restrictions in a license, which may be interpreted as fraud, patent misuse or antitrust violation.
Trademarks and Trade Dress
Under the Federal Trademark Act (15 U.S.C. § 1127), the term trademark includes “... any word, name, symbol, or device or any combination thereof … used by a person … to identify and distinguish his or her goods from those manufactured or sold by others and to indicate the source of goods …”
A number of trademark issues can arise in the context of medical device outsourcing. One such issue relates to the quality of the goods and/or services by the CM, where poor quality of such goods and/or services potentially may damage the OEM’s good will and reputation and weaken the value of its trademark; and, most importantly, cause problems with meeting regulatory requirements associated with the medical device. To prevent any potential damages to the OEM’s mark, the outsourcing agreement must contain detailed quality control provisions that lay out the OEM’s expectations and the CM’s compliance with any regulatory requirements.
Another trademark issue that often arises when the CM is located in another country is where the CM registers an OEM’s trademark in its own name in a foreign country. In this situation, once the outsourcing contract is complete, or the relationship between the parties terminate, the OEM may not be able to use its mark in that country because it already has been registered to someone else. To avoid this scenario, the outsourcing agreement should include provisions that specifically provide that any registration of the OEM’s trademarks by the CM shall be on behalf of the OEM, such registrations shall be owned by the OEM, and that any use of the marks shall inure to the benefit of the OEM.
Ancillary considerations similar to trademark issues include rights in any trade dress, which can provide similar proprietary rights in the manner in which a product’s characteristics in its visual appearance or its packaging that signify the source or original of the product to consumers.
Copyright Concerns
Under the Copyright Act (17 U.S.C. § 102(a)), copyright protection extends to “original work of authorship fixed in any tangible medium of expression ... from which they can be perceived, reproduced, or otherwise communicated directly or with aid of a machine or device.”
Medical devices often include features such as software that are copyrightable. Copyright laws give the owner of a copyrighted work a number of exclusive underlying rights, which include the right to reproduce the copyrighted work; right to prepare derivative works; right to distribute copies, sales, rental, lease or lending of the copyrighted work; and right to display the copyrighted work. Each right can be independently owned, licensed or infringed.
Where software is embedded in the medical device, one copyright issue that relates to medical device outsourcing may be the protection of that software, particularly when the development of the software is being outsourced. To protect a copyrighted work, the outsourcing contract must specify the underlying rights that are bargained for among the parties. The confidentiality provisions of the agreement further must ensure that the confidential information owned by the OEM is protected while the CM is given adequate access during the outsourcing contract.
Another copyright-related issue in outsourcing is the question of ownership of a copyrightable work. According to the U.S. copyright laws, the author of a work of art is the automatic owner the moment he or she affixes such work to a tangible medium of expression. Under the doctrine of “work made for hire,” however, an employer may become the owner of a copyrightable work created by an employee. When outsourced, an OEM must establish by written agreement that the software being developed by the other party is a work made for hire, and include a provision requiring that all software developed under the agreement is being assigned. In such a case, if an employee of the CM develops software for the OEM’s device, the CM will become the owner of that software, not the OEM. As mentioned earlier, however, it is more beneficial for the OEM to own all the IP because it will have more flexibility to switch CMs, if necessary to comply with regulatory laws.
Thus, the best way for the OEM to own a copyrighted work developed by a CM may be to include a copyright assignment clause in the outsourcing agreement that would require the CM to transfer the ownership rights of a copyrighted work to the OEM while retaining some residual rights to complete the outsourcing contract.
Keeping Trade Secrets
Trade secret laws protect many different forms of intellectual property including idea, information and know-how that may or may not be copyrightable or patentable. The Uniform Trade Secret Act § 1(4) adopted in most states defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value ... and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Unlike the United States, many countries around the world do not provide any protection for trade secrets.
In the United States, a trade secret owner has the exclusive right to use the trade secret to derive economic benefit as long as it remains a secret. Once a trade secret is lost through independent discovery or legitimate means, such as reverse engineering or the information becoming public knowledge, it is lost forever. One way to protect trade secrets associated with medical devices in an outsourcing transaction is by establishing strict confidentiality rules via the outsourcing agreement. Such confidentiality provisions must require the CM’s employees, who will have access to the OEM’s confidential information, to sign a confidentiality agreement with the OEM making them personally liable for disclosure of any such information to unauthorized parties.
Other means of protecting trade secrets can be achieved by way of non-competition agreements, and non-solicitation agreements between OEMs or CMs and their employees. A non-disclosure agreement protects trade secrets against improper disclosure or use by employees, former employees and independent contractors. A non-competition agreement will forbid an employee from working at the same capacity for a competitor for a specified period of time in a specified geographical region. A non-solicitation agreement will prevent the ex-employees to solicit other employees to join them in competing with the OEM or CM. All of these contractual agreements, however, are subject to limitations imposed by state laws, which are heavily based on public policy and individual rights.
Due to the unique nature of the medical device outsourcing transactions and the intellectual property rights involved, as a general rule, parties engaged in an outsourcing agreement should not rely on boilerplate contractual provisions for protection of IP. Instead, parties must draft and negotiate their IP-related concerns based on their particular needs and IP rights. Finally, to be more effective in protecting IP rights, parties must be able to identify the categories of IP they own, distinguish them from those of the other party or a third party and carefully address their expectations for each of the underlying rights associated with each IP category by way of negotiation and through the outsourcing agreement.
Atabak Royaee, Ph.D., is a patent agent and science advisor in the area of life sciences at the international law firm of McDermott Will & Emery LLP and is based in the firm’s Boston, Mass., office. He focuses his practice on prosecution of biomedical patent applications. He also provides attorneys with technical assistance in licensing and transactional due diligence matters. Atabak currently is a third-year law student at Suffolk University Law School in Boston.
Toby H. Kusmer, PC, is a senior partner at McDermott Will & Emery LLP, and also is based in the firm’s Boston office. He focuses his practice on all aspects of intellectual property law, both U.S. and international, including ex parte and inter partes matters such as patent and trademark prosecution, opinions, licensing and contract work and related counseling and litigation.