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IP Monetization: 4 Categories for Consideration

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.

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Outsourced Manufacturing and Trade Secrets: Final Considerations

Transition Services

Trade secrets text concept isolated over white backgroundAfter 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. 

Trademark Protection

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.

Non-Compete Covenants

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. 

Related articles:

1. Outsourced Manufacturing and Trade Secrets: An Economic Overview

2. Outsourced Manufacturing and Trade Secrets: Outsourced Manufacturing

3. Outsourced Manufacturing and Trade Secrets: Risks & Benefits

4. Outsourced Manufacturing and Trade Secrets: Internal Controls

5. Outsourced Manufacturing and Trade Secrets: Due Diligence

6. Outsourced Manufacturing and Trade Secrets: Transaction Structure & Contract

7. Outsourced Manufacturing and Trade Secrets: Manufacturing Process & Personnel

8. Outsourced Manufacturing and Trade Secrets: Controlling the Manufacturing Process

9. Outsourced Manufacturing and Trade Secrets: Contractual Trade Secret Protection Measures 

10. Outsourced Manufacturing and Trade Secrets: The Manufacturer Relationship

11. Outsourced Manufacturing and Trade Secrets: Obligations Concerning Manufacturer’s Employees and Contractors

12. Outsourced Manufacturing and Trade Secrets: Security Procedures for Access, Storage, and Transmission

 

David L. Cohen

David L. Cohen, P.C. – Kidon IP
123 West 93rd Street
New York, NY 10025
dlc@davidlcohenpc.com 
(914) 357-5196

 

Outsourced Manufacturing and Trade Secrets: Security Procedures for Access, Storage, and Transmission (Part 12)

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Licensing of Trade Secrets and IP

The licensing of the company’s trade secrets and other IP should be consistent with the company’s identification of its trade secrets and other IP and appropriately limited in scope. Among other considerations, the license should be:

  • Narrowly tailored to cover only the manufacturer’s required use of the licensed information and IP. 
  • Revocable and subject to immediate termination when appropriate.
  • Sublicensable and assignable only to the extent necessary under the arrangement.

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Outsourced Manufacturing and Trade Secrets: Obligations Concerning Manufacturer’s Employees and Contractors (Part 11)

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Employee Termination

While not always possible given local labor laws, to the extent possible, the company should require the manufacturer to adopt protocols to govern a termination of the manufacturer’s employees in a manner that minimizes the risk of the employees taking confidential information with them when they leave the manufacturer. These may include:

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Outsourced Manufacturing and Trade Secrets: The Manufacturer Relationship (Part 10)

The outsourced manufacturing agreement should require procedures that limit access to the company’s confidential information to specific, identified manufacturer personnel and solely to the extent they need to know the information for performing the services.

If possible, the company should require the manufacturer to amend its employment contracts with individuals having access to the company’s confidential information to provide for confidentiality and non-compete obligations concerning this information. The outsourced manufacturing agreement should make the manufacturer directly liable to the company for any breach of these obligations. Read more

What is a Trade Secret Audit and Why Get One?

What is a Trade Secret Audit and Why Get One? by David L. CohenAt 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

Outsourced Manufacturing and Trade Secrets: Contractual Trade Secret Protection Measures (Part 9)

 Outsourced Manufacturing and Trade Secrets: Contractual Trade Secret Protection Measures (Part 9) by David L. CohenAs 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

Outsourced Manufacturing and Trade Secrets: Manufacturing Process & Personnel (Part 7)

Outsourced Manufacturing and Trade Secrets: Manufacturing Process & Personnel (Part 7) by David L. Cohen

After deciding on the basic corporate or contractual structure, the company should decide how best to strategically divide the manufacturing process. In the outsourced manufacturing context, the best process involves not only efficient manufacture, but also the most effective process to mitigate potential trade secret risks. Read more

Outsourced Manufacturing and Trade Secrets: Transaction Structure & Contract (Part 6)

Outsourced Manufacturing and Trade Secrets: Transaction Structure & Contract by David L. Cohen

Transaction Structure

Once the company selects a potential outsourced manufacturing partner, it should design a transaction structure that reinforces its commercial expectations and the manufacturer’s contractual obligations. Specifically, the company should structure the outsourced manufacturing transaction in a manner best suited to protect the company’s key intellectual assets (both registered IP and unregistered IP like trade secrets and know-how). Transaction structure considerations include both the particular corporate and contractual form of the relationship, and how the company will delegate the manufacturing process to the outsourced manufacturer. Read more

Outsourced Manufacturing and Trade Secrets: Due Diligence (Part 5)

Outsourced Manufacturing and Trade Secrets: Due Diligence by David L. CohenPerhaps the single most important part of outsourced manufacturing is to select a trustworthy partner. A company should not enter into any transaction unless it has a good basis to believe that the manufacturer will be an acceptable partner. This requires rigorous due diligence, including:

  • Background checks of the manufacturer’s principal officers, directors, and key personnel.
  • Audits of the manufacturer’s financial statements.
  • Inspections of the manufacturer’s facilities.
  • Investigations of the manufacturer’s supply chain and trading partners.

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