There is no doubt that the number of patents declared as potentially essential to technical standards is not an indication of essentiality; its only purpose is to make those declared patents accessible on FRAND terms should they ever become essential. Tim Pohlman, founder of IPlytics a commercial technology consultancy, participated in an empirical study and report of essential patents commissioned by the European Commission (Tender No ENTR/09/015 (OJEU S136 of 18/07/2009)). In December 2016 his consultancy, released a 62 page report on SEPs commissioned by the EC. The report was the result an heroic effort to sort through and normalize patent declaration data for all widely adopted standards (See Fig. 1). This work was (and is) important and should not be under-valued. It has long been recognized (e.g., n.10), that patent declaration information “can be hard to find,  the links are often messy, and standards often see improved, updated releases.” On the back of the data the IPlytics team has been collecting about patents declared as potentially essential and 3GPP documents, they have been issuing privately-commissioned reports discussing their data as well as their analysis of the data in greater detail. Their recent reports on 5G have been widely discussed in the media and at conferences.
In my prior article addressing confidentiality agreements, I reviewed how to identify a company’s intangible assets and how to protect them with an NDA. This article will continue the discussion of preparing an NDA.
When preparing a confidentiality agreement it should go without saying – but it often needs to be emphasized – that a company should take the following steps:
- Treat the company’s portfolio of confidential information as a valuable business asset. Confidential information can be used and shared more effectively and securely, to the greater benefit of the business, if the company routinely takes stock and assesses the value of its information assets.
- Implement and adhere to company-wide information and data security policies, systems, and procedures. This includes at least:
A uniform confidentiality and proprietary rights agreement signed by all employees;
An information technology and communications systems policy that governs employees’ appropriate use of company confidential information;
Robust physical and electronic security measures, which should be regularly tested, audited, and updated;
Systems and processes to monitor and detect unauthorized disclosures of confidential information; and
Contingency plans and procedures to address any leaks that are detected, including notification of other parties whose information may have been disclosed in violation of applicable confidentiality arrangements and mandatory notification of individuals whose personal information is compromised.
- Comply with contractual obligations governing others’ confidential information. A company may be challenged with respect to this issue though:
Clear nondisclosure obligations, that may, for example, preclude sharing protected information with subcontractors;
Restrictions on use of the information, that may limit using the information for a stated purpose like evaluating a business deal, or fulfilling contractual obligations like manufacturing a particular product;
Restrictions on access to the information within the recipient’s business and among its employees – typically, employees are allowed access to confidential information on a need-to-know basis – on this front the cooperation of a company’s human resources department is key;
Physical and electronic security requirements, which might be more stringent than the recipient’s policies and procedures applicable to its own confidential information; and
Obligations to return or destroy original materials containing confidential information or materials incorporating such information as per the applicable agreement.
- Protect certain confidential information as trade secrets. Confidential information may also be a trade secret. If so, it will be subject to the protections of relevant state or federal law. For example, any of the following information might be considered trade secrets: client lists; marketing plans; pricing information; business plans; manufacturing processes; formulas; software algorithms; source code; and inventions (at least those not disclosed through a published patent application).
- Comply with privacy and data protection laws and regulations. Certain kinds of personal information that are commonly held by businesses (such as employee records and customers’ financial accounts) may be subject to special requirements under various federal and state privacy and data protection laws and regulations.
Contact me today with questions or comments.
David L. Cohen, P.C. – Kidon IP
123 West 93rd Street
New York, NY 10025
The remedies a court can impose on behalf of a standard-essential patent owner whose Essential Patents are infringed, and even the remedies an Essential Patents owner requests became an especially contentious question between 2013-2015. During that time window, it seemed like courts and regulators were trying to severely limit the remedies available for Essential Patents infringement, and facilitate strategic infringement, also known as “efficient infringement”. Thankfully, a sense of balance seems to be returning to the policy landscape surrounding Essential Patents. Proof of this return to balance can be seen in the approach to Essential Patent remedies of the December U.S. executive branch statement on this topic.
In my prior piece, I noted IEEE General Director Karachalios’ anti-patent positions and protectionist associations that one might find troubling in a 25 year EPO employee or the Managing Director of what is billed as the “world’s largest technical professional organization for the advancement of technology.” One would have assumed that love of technological growth and internationalism were a key requirement for such a position. Yet a review of Karachalios’ positions seem more that of an ideologue than anything else. Indeed, like many an ideologue, he shows disdain for pragmatism and an almost childish approach to established norms. How else to explain the series of creative self-published pieces justifying the IEEE-SA IP policy rule provisions.
While companies are starting to better appreciate the role trade secrets can play in underpinning their intellectual capital, proactive trade secret management is still a very much neglected activity. This neglect can ultimately lead to the loss of valuable trade secrets and the loss of millions of dollars of value and legal fees. The widespread failure of many companies to take reasonable steps to protect their information should give managers and their company directors much pause. Fortunately, the law is starting to provide a clearer picture of what needs to be done, and there are many providers well versed in both best practices and productivity tools that will enhance a company’s trade secret protections. Read more
In my prior piece, I noted IEEE General Director Karachalios’ anti-patent positions and protectionist associations that one might find troubling in a 25 year EPO employee or the Managing Director of what is billed as the “world’s largest technical professional organization for the advancement of technology.” One would have assumed that love of technological growth and internationalism were a key requirement for such a position. Yet a review of Karachalios’ positions seems more that of an ideologue than anything else. Indeed, like many an ideologue, he shows disdain for pragmatism and an almost childish approach to established norms. How else to explain the series of creative self-published pieces justifying the IEEE-SA IP policy rule provisions.
One of the most important developments in the world economy has been the increased importance of ideas and innovation. It is no exaggeration to say that they comprise the predominant source of economic value in the world today. The challenge with ideas and innovations is that they are intangible — and as such, they are hard to protect and even harder to value.
Because IP monetization covers a wide range of business and legal activities, it is important to provide some examples.
Broadly, there are four categories of IP monetization:
1. The most straightforward is to get others — through negotiation or litigation — to pay (the IP owner) money for the right to practice or use your IP in exchange for cold, hard cash.
After termination or expiration, the company should require the manufacturer to provide extensive transition services to the company. In addition to customary provisions, the agreement could provide for the transfer to the company of key equipment; materials; or facilities. The agreement can further require the manufacturer to offer severance to crucial employees and encourage them to accept future employment with the company directly.
The company should require that the products manufactured by the outsourced manufacturer prominently bear the company’s trademarks and are not offered in association with the name or mark of the manufacturer, or any other third party.
The agreement should also include appropriate quality control obligations and oversight relating to the use of the marks. This should help the company create and maintain equity in the marketplace concerning company-authorized products.
Where possible under local law, the company should consider requiring certain non-compete covenants from the manufacturer so that the manufacturer has less incentive to misuse company trade secrets. These can also be included in modified employment agreements with the manufacturer’s employees. These provisions may be limited to a specific industry or sector, or in connection with specific company competitors.
Assignment and Change-of-Control Restrictions
Change-of-control and assignment restrictions are important protections in any outsourced manufacturing agreement. They can provide the company with assurances that:
- The identity of the manufacturer will not change during the term of the agreement; and
- A competitor will not obtain access to the company’s sensitive information through corporate affiliation with the service provider.
Applicable Law Considerations
The laws of each particular jurisdiction define what constitutes a trade secret in that country and the protective measures that owners must take to be eligible for legal remedies for misappropriation. Local counsel should, therefore, be consulted in each relevant jurisdiction to review the proposed agreement and to help determine the most effective means under local law to protect the applicable IP.
With respect to trade secrets, at least as it relates to the US, the Defendant Trade Secrets Act (DTSA), enacted in 2016, expands certain protections under US law by creating a private federal cause of action for trade secret misappropriation. Additionally, 49 states (with the notable exception of New York, which relies on common law) have adopted a version of the Uniform Trade Secrets Act (UTSA). The UTSA shares many similar provisions with the DTSA and may provide an additional or alternative cause of action if the misappropriation is within the state’s jurisdiction.
In sum, outsourced manufacturing is a very important part of the global economy. Along with the benefits, there are significant risks. Accordingly, a thoughtful approach to choosing a manufacturing partner, and to protecting one’s intellectual crown jewels, is paramount.
David L. Cohen, P.C. – Kidon IP
123 West 93rd Street
New York, NY 10025
I am very pleased that Practical Law has published a piece I co-authored with Doug Clark and Eric Stasik that discusses anti-trust issues associated with Standard Essential Patents (SEPs) and considerations for counsel managing SEP licensing programs. The purpose of the article was to provide a high-level overview of the entire life-cycle of SEP management from creation to licensing/litigation.SEP Licensing - Dec19Jan20 PracticeNote