Nanotech Sensors, NDA's, and Joint Development Risks (The Case of the "Self-Serving" NDA)
We wanted to review a case which we can call the case of the "self-serving" NDA. Let me explain:
One critical application of nanotechnology is in sensing, whether used for medical diagnostics or cleantech. For example, the NNI has recently produced a fifty page report on nanotech sensing at www.nano.gov (“Report of the National Nanotechnology Initiative Workshop, May 5-7, 2009”). When a sector of nanotechnology, such as sensing, becomes the subject of patent and/or trade secret litigation, this signals that the market for the technology has arrived.
One recent IP litigation has been focused on commercial products for nanotech sensing for glucose monitoring, and an important decision was just rendered. In reading these developments, lessons can be learned with respect to non-disclosure agreements, patent filings, and joint development. Many companies, of course, need to pursue joint development strategies in the real world, and the risks associated with joint development must be managed wisely.
To Read More about the Case of the Self-Serving NDA:
Roche Diagostics and Nova Biomedical (among others) have been in litigation over U.S. Patent Nos. 7,276,146 and 7,276,147 and related trade secret issues. The technology relates to microelectrode arrays, laser ablation, blood analysis, and nanoliter liquid flow and analysis.
Based on public information, Roche apparently visited Nova as part of the parties exploring joint development, and Roche was able to view some unpublished patent applications from Nova. The parties did not ultimately collaborate, IP issues arose between them, and the parties found themselves in court. A contract had been signed.
We stress: The purpose here is not to evaluate who had the better legal arguments, or provide a detailed review of the facts as presented in the public documents, or opine on whether the judge’s latest rulings were correct. Rather, the purpose is – briefly - to pass on several short, practical messages:
First, business pressures may arise to consider joint development, and there may not be much time to evaluate fully the risks. Business pressure may arise to sign contracts quickly. The contracts may seem deceptively simple. Litigations like the Roche v. Nova case illustrate that legal precautions must be considered carefully, despite the pressure to drive ahead and make a deal as quickly as possible. Disputes can and do arise.
Second, file patent applications, even if they are early provisional applications, before any exchange of information such as meetings with another party where confidential information is disclosed to the party. Later, the parties or the courts will need to sort out whether companies developed information on their own or learned about information from another party.
Third, there is nothing “wrong” with assuming when you meet a potential joint development partner that they have internal work already done in the area you will be discussing, that they will obtain patents on their technology (without your input or inventive contribution), and that they may sue you in the future for patent infringement. Moreover, if patent litigation breaks out, trade secret litigation will also be considered. Any contracts signed should consider this potential reality.
Finally, particularly for a US company, consider whether to negotiate for an IP contract where US law controls. If the other party refuses, hopefully concessions can be made to compensate for this refusal.
Oh, one FINAL interesting tidbit: in this litigation, one party apparently argued that the contract was “self-serving.” I was trying to think of examples of contracts in modern corporate experience which are not “self-serving”. Indeed, ...beware of that self-serving contract draft which may be on your desk!
In sum, this litigation illustrates (in the real world) that even if the parties elect to not work together after exchanging information, the exchange of information means that in a real sense, joint development has begun (and may have ended soon after it started). Other important themes can be developed based on the facts of the situation.
Broadly, this litigation provides evidence that the nanotech applications in sensing have reached commercially important levels. The NNI would do well to connects its funding efforts with the real world commercial realities and existing markets. It is good when new technology can serve existing markets, in addition to creating whole new markets.
For more detail, see directly Judge Farnan’s July 27, 2010 order in Civil Action No. 07-753-JJF (U.S. District Court, District of Deleware). See also reporting by Christopher Norton in Law360, July 28, 2010.