If you follow statements of antitrust agencies the world over – even as far away as China and Korea – you would think that there is a crisis going on in SEP licensing. Some agencies have shown interest in the theoretical concept of “stacking” of SEP royalties. For example, a 2016 Speech by the European Commissioner for Competition Margrethe Vestager represented that “Patents and standards are very important in the world of mobile devices. One recent study shows that 120 dollars of the cost of each smartphone comes from paying royalties for the patents it contains.” While high royalties do not (and should not) create a presumption of anticompetitive behavior, it is not unreasonable where there are high royalties for a competition regulator to at least be curious whether there is anticompetitive conduct underlying such reality. Unfortunately, what has happened is the reverse: competition regulators have assumed a high royalty regime, where in fact royalties for handsets are relatively low. Aggregate SEP royalties are lower even than the 6-8% predicted by a leading manufacturer in 2009.
I am delighted that a short paper of mine (co-authored with Donal O’Connell) on the subject of ‘Trade Secret Theft in China’ has been posted on the IP Strategy blog. The paper briefly explains trade secrets before then describing the various scenarios in which foreign companies may find themselves. We suggest that some of the scenarios described are clear examples of trade secret theft but others less so, if not at all. Any and all feedback is most welcome.
Well it finally happened. Notwithstanding the settlement with Apple, the district court overseeing the FTC’s case against Qualcomm issued a blistering, 233 page opinion against Qualcomm’s SEP licensing practices. Some have argued that this ruling is just one more step in Apple’s long play attempts to kill SEP licensing – the technology that has put the “phone” into the iPhone. To better understand this claim it is worth looking back at Apple’s history with respect to SEPs.
by David Cohen and Donal O’Connell
While the laws governing trade secrets differ slightly from country-to-country, common among nearly all these laws is that a trade secret is any information that is:
- Not generally known to the relevant business circles or to the public. The information should also not be readily accessible.
- Confers some sort of economic benefit on its owner. This benefit must derive specifically from the fact that it is not generally known, and not just from the value of the information itself. It must have commercial value because it is a secret. Commercial value encompasses potential as well as actual value.
- It must have been subject to reasonable steps by the rightful holder of the information to keep it secret. What is reasonable can vary depending on the specific circumstances.
A trade secret continues for as long as the information is maintained as a trade secret. However, information may no longer be considered a trade secret once it becomes easily accessible, is no longer properly protected or has no commercial value.
Trade Secrets Need People to Exist
At first blush an audit sounds expensive, distracting and unnecessary. Let’s face it, we live in the age of the long tail. Over the past few years, things people would have previously given only a remote chance of coming to pass seem to be happening on a regular basis. What’s more, the pace of change and disruption in business and in the personal world is so great, it is almost impossible to keep up. It seems that whatever you are doing today will have to be radically altered very soon. With all this change most of us are running just to stay in place — so any distraction from the daily chores of simply keeping up needs a powerful justification. I would argue however, that the frenetic pace of business life is precisely why audits are so important. Just as mindfulness is rightly understood as being key to a centered life, trade secret audits are essential to continued success as a business. Read more
As we have discussed elsewhere, a trade secret audit or assessment is vital if a company is to protect itself during the outsourced manufacturing process. [See these articles: Trade Secret Audits – Why Bother? ; You’ve Decided to Conduct a Trade Secret Audit. Now What?; You’ve Decided to Conduct a Trade Secret Audit. Now What? Part 2 ] Read more
Donal O’Connell and I are very pleased to announce that Practical Law of Westlaw / Thomson Reuters has published a Practice Note of ours related to trade secret valuation. Click below to view the Practice Note in its entirety.Trade Secret Valuation (W-019-2083)
Donal O’Connell and I are very pleased to announce that Practical Law of Westlaw / Thomson Reuters has published a Practice Note of ours related to trade secret audits. Click below to view the Practice Note in its entirety.Trade Secret Audits
Last time, I discussed outsourced manufacturing as well as the process and personnel. Now, I continue the discussion by exploring control over transactions and products as it relates to IP protection.
Establishing and Maintaining Oversight
Requiring the manufacturer to maintain a designated facility for all work involving the transaction can reduce the risk of violations and simplify the monitoring and protection of the company’s IP. In all cases, the company should reserve the right to frequently audit the manufacturer’s facilities. If possible, the scope of these audit rights should extend enterprise-wide to ensure protection and containment of critical information. Read more