Intellectual Property As A Tool For Doing Business In The U. S. A.
Overview • • • Part III Part IV Part VIII Part IX Part X Non-Disclosure Agreements Supply Agreements Joint Venture And Development Agreements Protect Your Product or Service With IP Address 3 rd Party IP – Clearance Avoid Violations of U. S. Antitrust Law You Receive a Warning Letter – What Next? Competitor Lawsuits Non-Practicing Entity Lawsuits Steps To Reduce Exposure 2
IP As A Tool For Doing Business In The U. S. A. Part I: Non-Disclosure Agreements 3
Non-Disclosure Agreements • Non-Disclosure Agreements (“NDA”) Are Common In The U. S. And Worldwide • Often Necessary Before Discussions Or Negotiations • Protect Valuable Information Of Disclosing Party • Create Potential Risks For Both Parties • Proper Drafting Is Critical 4
Purpose Of NDAs • NDAs Prohibit The Receiving Party From Disclosing Confidential Information • NDAs May Limit The Use Of Confidential Information • NDAs Protect Many Types Of Information – Trade Secrets – Invention Ideas – Other Confidential Information 5
Key NDA Provisions • • • Mutual Or One-way Protection Definition Of Confidential Information Exclusion From Confidential Information Restriction On Disclosure And Use Duration/Termination Of Agreement Remedies For Any Breach Of The NDA 6
Some Information Is Usually Excluded • Certain Information Is Typically Deemed Not Protected: – Publicly available information – Information known by the receiving party before the NDA – Information that the receiving party learns from another appropriate source – Information independently developed by the receiving party 7
Disclosing Party – Drafting Concerns • Include Limits On Use, Not Just Disclosure • Broadly Define What Is Confidential/Protected • Maximize Duration Or Make Indefinite – Terms up to 5 years are common in U. S. • Require Destruction Or Return Of Materials • Specify What To Do Regarding Requests For Protected Information From Non-parties To The NDA – Government / regulatory requests – Subpoena / litigation requests 8
Receiving Party – Drafting Concerns • Provide For Injunction Or Other Remedies If Breached • Limit Scope And Narrowly Define What Is Confidential • Require Protected Information To Be Marked Confidential When Provided By The Disclosing Party • Limit The Duration Of The Agreement • Avoid Injunctions Or Other Draconian Remedies 9
Disclosing Party – Risks Of NDA • May Not Adequately Protect Party’s Most Valuable Secrets – – Do not disclose “crown jewels” even under NDAs Breach of NDA is often difficult to prove Remedies may be limited by NDA or applicable law May face high cost to enforce NDA • Review Carefully Before Signing – Beware: – Inadvertently giving receiving party rights in disclosed information – Inadvertently waiving confidentiality protections for disclosed information 10
Receiving Party – Risks Of NDA • May Be Unclear What Specific Information Is Protected – Disclosing party may provide both confidential and other nonconfidential information • Reduce Risk Of Inadvertent Breach – Limit who can sign NDAs for company – Establish procedures for compliance with NDAs – Require disclosing party to clearly mark each confidential document when provided • R&D Employees Who See Protected Information May Become “Tainted” • Potential Liability And Possible Injunction If Breached 11
Legal Considerations • In U. S. , Each State Has Separate Relevant Statutes – Law of each state defines what is a “trade secret” – Check applicable law for any limits that could apply to NDAs • Generally, A “Trade Secret” Is Information That Is Protected By A Company And Has Economic Value • Most States Have Adopted The Uniform Trade Secrets Act, Which Provides Remedies For Misappropriating Trade Secrets • Misappropriation Includes Wrongful Acquisition, Use, Or Disclosure Of Trade Secrets • Failing To Protect Trade Secrets May Result In Competitive Harm And Loss Of Legal Remedies 12
IP As A Tool For Doing Business In The U. S. A. Part II: Supply Agreements 13
Types Of Supply Agreements requirements contracts Considerations with include: (a) careful forecasting; (b) lead time forecasts (annual, quarterly, other); (c) consider allowing percentage variations between forecasts and orders; (d) Considerations with exclusive dealing • Requirements contract: a contract under which the supplier an agreements: (a) will the buyer need alternate supplier; (b) if exclusive, need agrees to supply, and the buyer agrees to buy, all of the goods reasonable and accurate forecasts of or services the buyer may need in a period of time. the exclusive supplier requirements; (c) can also supply to buyer’s competitors? Considerations with non-exclusive dealing • Exclusive dealing agreement: an agreement that requires the agreements: (a) can the buyer secure seller’s buyer to purchase all needed goods or services from only one commitment to sell for a specific term (and vice versa)? (b) can the supplier also supply seller to buyer’s competitors? (b) if so, does the • Non-exclusive supply agreement: an agreement under which supply agreement provide adequate controls for security of buyer’s technical data and each of the buyer and seller may buy and sell to third parties, information? without restriction *Definitions derived from Black’s Law Dictionary, 9 th Ed. (2009) 14
Buyer’s concern: what if the supplier is acquired by a Common Terms And Issues In Supply competitor? Seller’s concern: how might an assignment effect requirements volumes? Consider different kinds of Agreements “assignment, ” ranging from an arms-length assignment to a change of control. Some issues with indemnity clauses: (a) is there a cap on the • Assignment: the assignment clause will define whether the to indemnity responsibility? (b) is the indemnitor required carry insurance; (c) is the indemnitee a named beneficiary? agreement may be transferred by seller or buyer to another (d) what are the exclusions from the indemnity? (e. g. , product company, such as a successor-in-interest following a (e) when modifications made without supplier’s authorization) must claims be made? merger. Sample issues with termination clauses: (a) sufficiency • Indemnity: an indemnity clause is an agreement to pay of notice, to permit buyer to transition to a new supplier; (b) is another for a loss suffered. Types of covered losses in a the supplier required to transition design specifications, technical data, certification and similar product data? (c) supply agreement might include IP infringement, product from the supplier’s perspective, what security does it have for liability, and breach of contract. provide Clear definition of defaults and remedies payment? (d) on default • Termination: the termination clause will define whether and when each party may end the supply agreement. 15
Common IP Issues In Supply Agreements • Who owns the product? • Who owns improvements to underlying technology? – Process Technology – Product Improvements • Confidentiality Provisions – To what extent can a supplier use the buyer’s ideas, product specifications, designs for another customer? • Address whether the supplier will introduce any third-party intellectual property into the material or manufacturing process and obtain corresponding representations and warranties regarding title, rights of use, rights of buyer’s downstream customers, etc. 16
Common IP Issues (cont. ): Joint Ownership • When Does Joint Ownership Arise? As a result of the rules regarding ownership of jointly developed – Patent intellectual property, parties often jointly own intellectual property o When 2 or more parties directly or indirectly work rights developed in a supply agreement, even though that may be the together as defined by the claims in the patent least efficient structure for both parties. Consider that joint ownership o Without an agreement a contributor (even 1%) to any (a) permits the supplier to sell to buyer’s competitors and (b) permits claim owns an undivided interest in the entire patent. buyer to purchase from seller’s competitors. – Copyright o Take away: carefully scrutinize IP ownership clauses to confirm When 2 or more authors’ contributions are inseparable or interdependent and they had an intention to create a each party secures what they need without unreasonably hindering the “joint work. ” other party’s business objectives o Authors need not work together physically or at the same time like inventors of a patent. 17
Common IP Issues (cont. ): Trade Secrets • Carefully consider whether necessary to disclose the Trade Secret • Contractually bind the Supplier to a “duty of confidentiality” (as discussed in Part 1) • Specify safeguards to maintain the secrecy of the information – – – Physical, Logical and Procedural Security Requirement of Off-Network Storage Use Only Within a Specific Site Strict Limitation of Internal Disclosure Compliance system (such as audits or inspections) 18
IP As A Tool For Doing Business In The U. S. A. Part III: Joint Venture and Development Agreements 19
Examples Of “Joint Ventures” Joint Venture, LLC: a separate legal entity vs. Strategic Alliance: a contract-based collaboration vs. Mentor-Protégé: a collaboration between established and start-up companies, e. g. 8(a) 20
Reasons To Joint Venture • Reasons To Joint Venture Include: – – Building lasting relationships Gain valuable IP or skills Reduced pricing for components or services Faster development of new products and services, due to pooling of resources and skill-sets – Share development costs and expenses 21
Reasons To Joint Venture • Reasons To Joint Venture Include (Cont. ): – Expanded business and sales opportunities – Spin-off potentially valuable platforms not otherwise essential to company’s core business – Can couple new entity creation with equity investment 22
Reasons Not To Joint Venture • Reasons Not To Joint Venture Include: – Maintain 100% ownership of IP rights – Maintain control over timing, design, and quality – Reduce or eliminate third party access to company’s proprietary processes and designs – Independence in strategy and execution – How will the Joint Venture be managed? Can you control its use and disposition of your IP? 23
Types Of Joint Ventures By Relationship: By Relationship • Consumer / Supplier Joint Ventures • Consumer/Supplier Joint • Competitor / Competitor Ventures Joint Ventures • Competitor/Competitor • University / Industry Joint Ventures • University/Industry Joint Ventures By Rights (one or more of): • Shared Intellectual Property • Shared Operations • Shared Ownership 24
Contributing IP To A Joint Venture • Strategic Considerations – What IP Assets Does Your Joint Venture Need To Be Successful? o Patents o Copyrights o Trademarks o Trade Secrets/Technology 25
Common Provisions And Issues In Joint Ownership Agreements • • • Setting Initial Ground Rules In-Bound and Out-Bound IP Licenses Addressing Joint Ownership of Joint Venture IP Responsibility for IP Prosecution Third Party Rights IP Rights Following Dissolution / Termination 26
IP As A Tool For Doing Business In The U. S. A. Part IV: Protecting Your Product or Service 27
Understanding IP Rights • Intellectual property can be generally defined as commercially valuable products of the human intellect. – PATENTS: protect an invention – TRADEMARKS: word/phrase/symbol identifies and distinguishes the source of the goods – COPYRIGHTS: protects original artistic or literary work – DOMAIN NAMES: protects website name – TRADE SECRETS: confidential information. 28
Patent Rights • Patent Rights – Protects ideas – Covers devices, methods of manufacture, etc. – Protection limited to 20 years from filing (14 years for design patents) 29
Patent Rights (cont. ) • A Patent Only Allows You To Exclude Others – Stops others from “practicing” Your patent o Making o Using o Selling / Offering to Sell o Importing • Your Patent DOES NOT Give You An Automatic Right To Use Another’s Patent or Even To Practice Your Own Invention. 30
Trademarks • Trademarks – Associates a product with a single source – Conveys consistency and quality o Mont Blanc o Coca-Cola o Grayco 31
Copyrights • Copyrights – Protects an expression of the idea o Software o User/Owner manuals o Characters – Excludes others from copying your expression of the idea 32
Domain Names • Domain Names – A registered name confers an exclusive right to use that name for your company’s website. – Exclusivity is restricted (. com, . org, . biz, . edu, etc. ) – May infringe trademark rights of others. – Best practice - have a federally registered U. S. trademark for the same name as your domain. 33
Trade Secrets • Trade Secrets – Competitive advantage o Processes/Recipes o Supplier lists o Know how – Possibly endless protection o Coca-Cola o Styrofoam cups – But must be kept secret o Corporate controls o Confidentiality agreement 34
How IP Rights Fit With Your Business • Technology is a key asset that must be protected. • Your potentially patentable assets must be identified on a case-by-case basis. • The know-how to produce a product or a service in a manner that sets Your company apart from competitors is a proprietary advantage. – Product designs, trade dress, brand names make a product attractive and appealing to customers. – Novel features add value. – Manufacturing costs may enhance competitiveness. 35
How IP Rights Fit With Your Business • Information That Is Commercially Sensitive Should Be Protected. • Information Is Commercially Sensitive If: – Disclosure would be commercially harmful – Disclosure would assist a competitor in duplicating sales success – Relates to a competitive advantage 36
So Where Are Your IP Rights? FOLDING ASPECT Method Patent IMPROVEMENTS Filament, Vacuum • Your product may contain innovative technology (or an improvement), which may be patented with a process or product patent. • You may make a product or provide a service that makes use of your company’s trademark. • The instructional manual or brochure that is sold with that product may be protected by copyright. Design Color Data 37
So Where Are Your IP Rights? • Your may have a component that cannot be reverse engineered – such as a UV coating. • Consider protecting it with a strong trade secret policy instead of getting a patent. – Have clear policies with employees regarding keeping secret information secret – Avoid exposing nonemployees to trade secrets, – Require nonemployees to sign nondisclosure agreements for the secrets they are exposed to. 38
Taking Steps to Protect Your IP Rights • First Step: – IP audit. What intellectual property does your business use or require? Review for potentially unprotected inventions, trade secrets, works of authorship, and logos or branding materials. 39
Taking Steps to Protect Your IP Rights • Second Step: – Evaluate your options for protecting those properties, considering how they may be used, with whom, and where. Conduct a cost-benefit analysis. 40
Taking Steps to Protect Your IP Rights • Third Step: – Implementing the Second Step, take action to protect your intellectual properties in the U. S. and, as appropriate, abroad. 41
Taking Steps to Protect Your IP Rights • Fourth Step: – Weave your IP protection objectives into your business practices. For example, address IP issues in dealing with suppliers, customers, and joint venture partners. 42
Taking Steps to Protect Your IP Rights • You Must Take Affirmative Steps To Protect A Trade Secret – – – Marking sensitive documents “confidential” Establishing written policies for maintaining confidentiality Informing employees of trade secrets Employment/confidentiality/non–compete agreements Restricting access to trade secrets Employing physical security measures (lock gates and cabinets, entry passes, computer passwords) – Trade secret audits 43
IP As A Tool For Doing Business In The U. S. A. Part V: Addressing 3 rd Party IP - Clearance 44
Addressing 3 rd Party IP - Clearance • What Is A Clearance Search? – A search for another party’s intellectual property (typically patents) that may pose a risk to a new product (or process, compound, article of manufacture etc…) – Clearance searches are often referred to as freedom-tooperate searches or right-to-use searches 45
Addressing 3 rd Party IP - Clearance • What Is Being Searched? – – – Granted patents (both expired and unexpired) Published patent application Non-patent literature Trademarks Designs 46
Addressing 3 rd Party IP - Clearance • Freedom To Operate Analysis – In general, the clearance search is just a first step – If patent, design or trademark rights of another entity are identified as a result of the clearance search, it is generally necessary to next evaluate whether the new product infringes these patent, design or trademark rights – This determination is often referred to as a Freedom-to-Operate Analysis 47
Addressing 3 rd Party IP - Clearance • Why Is It Important To Evaluate Freedom To Operate? – Minimize the risk of being sued for infringement (e. g. , patent infringement) – Avoid legal and other costs associated with defending against a law suit – Avoid investment in a new product that cannot be brought to market due to another party’s intellectual property rights – Determine whether intellectual property rights may be available for the new product 48
Addressing 3 rd Party IP - Clearance • Intellectual Property is Territorial – Just because another entity has a patent in the United States, it does not mean that entity has a corresponding patent (or a patent reciting claims of similar scope) in Korea or in any of the European member states – Thus, it is not only important to determine whether a new product infringes the intellectual property rights of other entities, it may be just as important to determine whether those rights are jurisdictionally limited – In the above example, one may determine there is no freedom to operate in the United States, but there is freedom to operate in Korea and Europe 49
Addressing 3 rd Party IP - Clearance • – – – No Freedom To Operate … Your Options Invalidation Expiration (e. g. , for failure to pay maintenance fees/annuities) Design around Licensing (cross-licensing) Purchasing 50
Addressing 3 rd Party IP - Clearance • Who Typically Performs Clearance Searches? – A professional search firm whose job it is to find the most relevant patents, designs and/or trademarks – May or may not be a law firm 51
Addressing 3 rd Party IP - Clearance • Who Typically Performs Freedom To Operate Analysis? – A law firm to analyze the intellectual property identified as a result of the clearance search – If determining whethere is freedom to operate in more than one jurisdiction, it may be necessary to employ a firm in each jurisdiction with the requisite knowledge of the laws in the corresponding jurisdiction 52
Addressing 3 rd Party IP - Clearance • Clearance searches and freedom to operate analyses are thus important tools for making the right business decisions particularly with regard to bringing new products to market 53
IP As A Tool For Doing Business In The U. S. A. Part VI: Avoid Violations Of U. S. Antitrust Law 54
Recent Developments • Department of Justice’s Antitrust Division filed 90 cases last year, more cases than in nearly 25 years. • According to DOJ’s recent annual report, the U. S. government “remains committed to ensuring that culpable foreign nationals, just like U. S. co-conspirators, serve jail sentences in order to resolve their criminal liability. " • Criminal penalties reflect average prison sentences of ten months foreign nationals. 55
AUO Case • Earlier this year AUO and two senior executives were convicted of price fixing in the LCD industry. • In September AUO was fined $500 million and the executives received 36 -month jail terms • Verdict confirms ability of DOJ to target activities outside the U. S. including meetings in foreign countries • Korean businesses that want to do business with the U. S. should be aware that activities in Korea and other foreign countries may result in U. S. antitrust penalties 56
Other Recent Cases • In September 2012, antitrust enforcers in U. S. , Japan, and Europe launched joint price-fixing investigation of international car shipping. • In October 2012, a group of electronics makers, including Sony and Panasonic, were sued by a proposed class of consumers who claim the companies conspired to fix prices on lithium ion batteries. • According to news reports, the FTC is preparing to file a case alleging Google illegally used its dominance of the search market to hurt its rivals. 57
Sherman Act • • The Sherman Act is centerpiece of U. S. antitrust law Elements of Section 1 violation: 1. A defendant is a party to a contract, combination, or conspiracy—that is, concerted action—and 2. The agreement imposes an unreasonable restraint on trade. • Elements of Section 2 violation: 1. A defendant has monopoly power in a relevant product and geographic market, and 2. Exercises that power in unlawful ways. 58
Statutory Scheme • Sherman Act (1890) – Most important legislation – Section 1: Prohibits certain coordinated conduct – Section 2: Addresses Monopolization • Clayton Act (1914) – Addresses price discrimination and mergers • Federal Trade Commission Act (1914) – Outlaws “unfair methods” of competition • Cases brought under these three statutes by DOJ, FTC, competitors, and consumers 59
Penalties • Sherman Act – Criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. – Maximum fine may be increased to twice the amount the conspirators gained or twice the money lost by the victims, if either amount is over $100 million. • Clayton Act – Individuals can recover three times the amount of damages actually suffered, known as treble damages, attorneys’ fees, and other litigation costs. • FTC Act – The FTC has the authority to issue a cease-and-desist order that the violator stop its anticompetitive practices. 60
Extraterritorial Application • The Foreign Trade Antitrust Improvements Act (“FTAIA”) makes the Sherman Act applicable if foreign conduct: 1. Has a direct, substantial, and reasonably foreseeable effect on domestic commerce, and 2. Such effect gives rise to a Sherman Act claim. • In June 2012 a federal appellate court issued a ruling that will likely result in fewer successful motions to dismiss by defendants at the outset of an antitrust case involving foreign conduct. 61
Sherman Act Section 1 • Two elements: (1) defendant was a party to a contract, combination, or conspiracy (i. e. , concerted action) and (2) the agreement imposed an unreasonable restraint on trade. • Most cases evaluated under “rule of reason” that looks at all facts and circumstances • But some violations are “per se” illegal, including: – Price Fixing Among Competitors – Agreements Among Competitors to Divide Markets or Allocate Customers – Group Boycotts or Concerted Refusals to Deal 62
Horizontal vs. Vertical Restraints of Trade • Horizontal – Concerted actions among competitors – Generally the most serious antitrust violations and most susceptible to criminal penalties. – Commonly per se • Vertical – Relationships between suppliers and customers. – Examples include vertical resale price maintenance, non-price territorial and customer restrictions, tying arrangements. – Generally rule of reason and less severe treatment than horizontal restraints. 63
Price Fixing • • • Agreements among competitors with respect to prices for products or services are illegal per se. Most serious antitrust violation. Include an agreement or understanding: – – To raise, lower or maintain prices To limit discounts, rebates or promotions Can include price formulas and guidelines Can include decision not to negotiate on price 64
Conduct to Avoid • • • Any statement indicating suppliers have discussed prices among themselves or have had non-public meetings or communications. Use of the word “we” with reference to the industry (for example, “We decided to raise prices”). Statement that a particular customer, territory or contract “belongs” to a certain supplier (for example, “It was our turn to win”). 65
Patent Pools • • Patent pools can raise antitrust concerns. When DOJ approves pools, it often requires the following practices – Allow pool members to license outside of the pool – An independent expert to evaluates which patent are essential to the pool – An on-going review of the essentiality of patents – Reasonable royalties distributed on an agreed-upon formula – Non-discriminatory licenses – Limited access to proprietary information. 66
Scrutiny Of Patent Acquisitions • • This year the DOJ and FTC have made it clear that they intend to broaden their focus beyond traditional challenges such as patent misuse, or price fixing through licensing. Broadened approach will address such issues as: – Unilateral aggregation of patents by a competitor; – Collaborative acquisition and aggregation of patents by competitors; – Business practices of non-practicing entities (“NPE”) sometimes known as “trolls” or “patent assertion entities” 67
IP As A Tool For Doing Business In The U. S. A. Part VII: Received A Warning Letter 68
What Is A “Notice Letter” • What Is A Notice Letter? – Generally a “Notice Letter” is a written communication to a potential infringer(s) which places the potential infringer(s) “On Notice” of alleged patent infringement. 69
What Must A “Notice Letter” Include • To Provide Proper Notice, The “Notice Letter” Should Include The Following Elements: 1. Identify potentially infringing activity 2. Identify (such as by patent number) the patent that is potentially infringed 3. Offer a proposal to abate the infringement (such as a license) 70
Effect Of A “Notice Letter” • • • Provides Actual Notice Of The Patent Which May Start The Damages Period Under 35 U. S. C. § 287 Triggers A “Duty Of Care” Which, If Not Properly Discharged, May Result In Enhanced (Treble) Damages And An Award Of Attorney’s Fees May Provide The Potential Infringer With A Basis To Bring A “Declaratory Judgment” Action Against The Patent Owner For Invalidity, Non-infringement Or Inequitable Conduct (Or Some Combination Thereof) 71
Effect Of A “Notice Letter” (Cont. ) • Places The Infringer On Notice Of A Legal Issue So That The Potential Infringer Must Preserve Evidence Or Face Potential Sanctions 72
What To Do In Response • Consult With Patent Counsel – – – Investigate the allegations Develop defenses Assess risk Consider written response to notice letter Draft litigation “hold notice” for distribution to appropriate employees – Consider obtain an opinion of counsel to counter willful infringement claim 73
What To Do In Response • Investigate The Allegations – Analyze the patent and file history – Determine whethere is a basis for a non-infringement defense – Review known prior art and perform prior art search 74
What To Do In Response • Develop Defenses – Possible challenge to validity of relevant patent claims 1. U. S. P. T. O. , e. g. , reexamination 2. Filing a declaratory judgment action in district court – Assertion of non-infringement defense. May be done in a declaratory judgment action – Determine whethere is a possible basis for inequitable conduct from available information 75
What To Do In Response • Other Potential Responses – – Design around the relevant claims Determine whether a license is available Cease allegedly infringing activity Simply ignore the letter (never recommended) 76
What To Do In Response • Considerations In Responding To Notice Letter – Opportunity and open discussions to resolve the matter before suit – May lead to information on the patent owner’s motivations, valuation of the case and willingness to make a deal – May lead to obtaining patent owner’s theory of infringement and potential weakness – Care must be taken to avoid making any admissions that may be used against you at trial 77
IP As A Tool For Doing Business In The U. S. A. Part VIII: Sued By A Competitor 78
Steps To Take Early On After Being Sued • Overview: – – – – Document Retention Indemnity Settlement Venue Other Motions Counterclaims Reexamination 79
Document Retention • • The Sanctions Under US Law For Destroying Documents After A Defendant Becomes Aware That It Has Been Sued May Be Very Harsh Defendant May Be Sanctioned Even if Documents Are Destroyed Pursuant to a Corporate Document Retention Policy 80
Document Retention • First: – Work With Counsel To Interpret The Complaint In The Broadest Possible Manner Regarding Which Products Or Services Could Be The Basis For Claims 81
Document Retention • Second: Have Counsel Draft A Document Hold Letter – When distributing this letter, err on the side of being over-inclusive (sending it to a department, even when it is unlikely that the department has relevant information) Important to have counsel involved in drafting this letter because it will probably be discoverable Have department heads and other individuals who are likely to possess relevant documents, confirm that all documents are being retained – – 82
Indemnity • Important To Quickly Identify Potential Sources For Indemnity – Many purchase agreements with indemnity clauses state that indemnity is waived if the indemnitor is notified immediately of potential claims Suppliers of components may be liable for indemnity Insurers may be source of indemnity – – 83
Settlement • Have Counsel Analyze The Strength Of Any Infringement Claims – Strong infringement claims: o Invalidating a patent claim can be expensive and no guarantee that the claim will be invalidated o Even when invalidity argument is strong, must consider settling the case early – Weak infringement claim: o Still should consider early settlement as the price of patent litigation may be expensive 84
Settlement • Settlement Considerations: – – – Is there potential for cross-licensing? Is allegedly infringing product unimportant? Do not want to have reputation as a “patsy” that always settles rather than fights frivolous suits o This consideration is less important when sued by a competitor. There are generally a limited number of competitors as opposed to a potentially limitless supply of NPEs. 85
Settlement • Have Counsel Contact The Other Side – Generally not a sign of weakness to contact the other side early and find out what they want. o Many lawyers will contact the other side at the beginning of all cases o But if potential strong motions to transfer or dismiss, may want to wait to raise settlement possibility until plaintiff has seen those motions – Cross licensing may be economical way to settle – Small royalty may be less than cost of litigation o But other side will be aware of costs, although they will also incur costs if no early settlement 86
Venue • Competitor Has Sued Where It Believes It Has Certain Advantages, Which Could Include: – “Home Field” o Cheaper to Litigate o Well-Known to Potential Jurors Favorable Jury Pool for Plaintiffs Quick Time to Trial Favorable Law o Certain Issues in IP Litigation Are Decided Based on the Law of the Circuit, Which May be More Beneficial to Plaintiffs – – – 87
Venue • • • Recent Appellate Decisions By Both The Federal Circuit As Well As Certain Regional Circuits Have Made It Easier To Challenge Venue If Plaintiffs And Defendants Contacts With The Venue Are Not Strong, Courts Are Now Less Willing To Defer To Plaintiff’s Choice Of Venue Discuss With Counsel Whether Motion To Transfer Venue Should Be Pursued 88
Other Motions • Instead Of Filing An Answer, Consider Filing Motions To Dismiss – Does the court have personal jurisdiction? o Foreign defendants are more likely to win a personal jurisdiction motion – Does the court have subject matter jurisdiction? o Generally only patent holder can bring an infringement lawsuit o If patent is held by a subsidiary of the plaintiff, the court will probably lack subject matter jurisdiction 89
Other Motions • Rule 12 b Motion: Failure To State A Claim Upon Which Relief Can Be Granted – Courts have become more willing to grant these motions o Supreme court heightened pleading standard in Twombly. o More facts are now needed to successfully plead a claim – But recent change in law makes it easier for plaintiffs to fix their pleading problems by refiling the complaint 90
Counterclaims • • Always Consider Counterclaims Assert Your Intellectual Property Rights: – patent infringement – trademark infringement – theft of trade secrets 91
Counterclaims • Other Potential Federal Counterclaims Not Based On IP Rights – – Antitrust violations if the patentee is dominant in the market and o Acquired its patent via fraud, or o Asserted a claim that it knows will fail Lanham act violation: patent related advertising that is false – 92
Counterclaims • Other Potential State Law Counterclaims – Tortius interference: improperly trying to prevent your customers from buying your products – State law unfair competition: varies by state but may include o Improperly asserting a patent that the plaintiff knows is not infringed o False statements about your company or your products 93
Reexamination • • • If Review Of Prosecution History Shows That Certain Potentially Invalidating Prior Art Was Not Considered By PTO, Consider Asking For Reexamination Recent Change In Law Makes Reexamination A Better Option For Challenging Weak Patents Consider Requesting Reexamination Before Filing An Answer Because Some Courts Will Stay Litigation Pending Reexamination 94
IP As A Tool For Doing Business In The U. S. A. Part IX: Sued By An NPE / PAE 95
NPEs and PAEs • Non-Practicing Entity (NPE) or Patent Assertion Entity (PAE): – An entity that does not make or sell products or services utilizing the technology claimed in the patents-in-suit and earns the majority of its revenue from the licensing or enforcement of its intellectual property. Often referred to as a “patent troll”. – – Examples: Intellectual Ventures, Acacia Technologies; Rockstar Consortium, LLC – Note: Universities also considered NPEs 96
Statistics On NPE Actions • As Of November 2012, www. patentfreedom. com Has Identified Over 660 Distinct NPEs • NPE Lawsuits Have Increased Substantially Over The Last Decade, Especially Since 2004 • In 2011, Companies Found Themselves In Litigation With NPEs More Than 5, 200 Times 97
Statistics On NPE Actions • Since 1985, NPEs Have Been Involved In Over 7, 500 Lawsuits Against 9, 500 Operating Companies • Significant Joinder Limitations In The Patent Reform Act Has Resulted In An Increase In The Total Number Of Litigations 98
Strategies For Battling NPEs/PAEs • Manage Threat Before You Are Sued – – – Follow Known Trolls In Your Industry Monitor Industry Litigation Be More Proactive In Filing Patent Applications To Avoid Others Owning IP Rights Even Though You Invented First (First To File Is The New Rule) 99
Strategies For Battling NPEs/PAEs • Manage Threat Before You Are Sued – Hire Patent Monitoring Service To Monitor Newly Published Applications And Newly Issued Patents. Consider Prior Art For Dangerous New Applications Or Patents. File Petition For Post-grant Challenge With U. S. Patent & Trademark Office (USPTO) Within 9 Months Of Issuance Of Patent. – – 100
Strategies for Battling NPEs/PAEs • Manage the Threat Before You Are Sued – Consider conducting an infringement analysis through separate opinion counsel. BUT, BEWARE of WILLFULNESS CLAIM! File a declaratory judgment action in preferred jurisdiction, rather than waiting for NPE to sue in a “rocket docket” jurisdiction. – – 101
Strategies For Battling NPEs/PAEs • Manage Threat Before You Are Sued – Consider A Defensive Patent Alliance Or Join A Patent Aggregator o Examples: RPX and Allied Security Trust patent aggregation and patent defense funds. o Note: Although there are many different patent aggregator business models, many patent aggregators were formed as an effort to render more efficient the process of sharing and monetizing intellectual property rights. 102
Defending Against NPEs/PAEs • Defending A Lawsuit By NPEs/PAEs – Determine Whether You Have Indemnification From A Supplier Or Third Party o Review all potential supply/indemnification agreements and provide notice to third party. Request reexamination of the patent at the USPTO – 103
Defending Against NPEs/PAEs • Defending A Lawsuit By NPEs/PAEs – – Coordinate Defense With Other Companies Who Have Been Sued. – Benefits include: o Ensuring consistent claim construction and invalidity positions o Sharing of workload o Reducing overall costs Enter into a Joint Defense Agreement to: o protect your confidential information o protect your interests if one or more defendants settle early. o memorialize the common interest privilege. 104
Defending Against NPEs/PAEs • Defending A Lawsuit By NPEs/PAEs – Refuse To Settle Early And Fight Back o NPEs often want quick settlements to fund their litigations In Any License Agreement, Seek Long-term Agreement Until Expiration Of Patent, Favored Nation Clauses, And “Peace” (No Further Lawsuits) – 105
IP as a Tool for Doing Business in the U. S. A. Part X: Steps To Reduce Your Exposure 106
Forewarned; Forearmed • Steps to reduce exposure vary depending on the company, Insurance options can range from product liability industry, and product, but potential steps include: to patent infringement Balance your potential liability among insurance – – – the component suppliers, OEMs, A strong IPmanufacturers. used for portfolio can be Insurance multiple objectives, including countering direct threats (e. g. , Indemnity Product regulations in event of a counterclaim in the U. S. are Strong IP Portfolio issued on both the national and state competitor assertion), addressing level competitor can range from food Following Import and Trade Laws andinfringement, facilitating regulation (e. g. , the 2011 Food and joint development projects, Safety Regulations Modernization investment securing Act) to California Product Regulatory Compliance guidelines for disclosures on various consumer electronics and household Well Crafted Contracts goods and – Follow Parts 1 through 9 107
End Questions? 108
