Category Archives: Contracts

Best Practices for Non-Disclosure Agreements

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It is widely accepted that the value of most companies today lies primarily in their confidential business and technical information and other intangible assets and when such assets are stolen it is almost always by employees and business partners, not unknown third parties. Yet, many companies continue to make minimal efforts to protect such assets through proper non-disclosure agreements (“NDAs”), disclosing secrets without requiring a signed NDA, relying on the same poorly-drafted NDA in all cases, or failing to follow through to ensure agreements are properly signed and filed.

Admittedly, NDAs can’t provide perfect protection. Litigation is costly, burdensome and uncertain, and companies often prefer to remain silent about embarrassing leaks of trade secrets. Consequently, the first line of defense should always be sound security precautions, such as locked doors, limited access, logbooks, security cameras, encryption, monitoring, and the like. However, in the event of a leak, the company that regularly requires signed, well-drafted NDAs is far more likely to achieve a favorable outcome than one that does not.

Wearable-device maker, Jawbone, learned that last month when the San Francisco Superior Court granted its request for an injunction against several former employees accused of loading thousands of confidential files onto thumb drives and e-mailing them to personal e-mails, before quitting their employment and going to work for Fitbit, Jawbone’s competitor. The court found the employees breached the confidentiality provisions in their employment contracts and ordered them to return all of the files. So far at least 18,000 files have been returned. The case is typical and is probably far from over, but certainly Jawbone is far better off due to the contractual obligations it imposed on its employers.

To ensure good results like that, below are some best practices to keep in mind when drafting NDAs. Continue reading →

How I Dragged a $5.4 Million Patent Suit out of U.S. District Court and into Taiwan

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The first time I testified in court in Taiwan, I spoke English and the judge translated simultaneously for the attorneys and clerks. After fifteen years here, I speak enough Chinese to direct taxi drivers, but not enough to discuss complex licensing negotiations. Fortunately, our judge earned her law degree in the U.S., is fluent in English and was kind enough to help out.

The second time was different. The judge gave no indication that he spoke English, so the opposing witness and I each brought an interpreter. My interpreter regularly handles Taiwan legal proceedings and rode the subway twenty minutes to get to the hearing, as did I, while our adversary flew a lawyer, translator and witness from London, with the corresponding costs of airfare, hotel, meals and time.

Of course, that was why we sued them in Taiwan. Well, that and the fact that our adversary would be forced to try the case in Chinese, struggling with jet lag, unfamiliar procedures and potential bias, while my client would be comfortably on home turf, using native language, avoiding the hassles and costs of U.S. litigation. But I suppose I should start at the beginning. Continue reading →

Maximize Royalties through Strategic Licensing Audits

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It’s no secret, most intellectual property licensees under-report royalties, often by a large margin. According to one study, 89% of all licensees under-report, with one-fourth short-changing licensors by more than 100%.

Fortunately, licensors can increase the odds of recovering the royalties they bargained for — rather than allowing their licensees to unilaterally name their price — by drafting key licensing provisions with care and strategically monitoring and auditing of licensees.

The below article lays out a few of those best practices to be employed by prudent licensors. Continue reading →

When is Foreign Patent Licensing Subject to U.S. Antitrust Law?

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confused-lawyerPatent law and antitrust law have long had an uneasy relationship. A patent is a legal monopoly, but antitrust law favors market competition and abhors monopolies. Consequently, U.S. courts have struggled for over a century to define reasonable boundaries between the two disciplines.

In the U.S., the Sherman Antitrust Act is at the core of most antitrust litigation. In the early years of the Act, patents were seen as almost immune from its reach, with the Supreme Court stating a general rule of, “absolute freedom in the use or sale of rights under the patent laws. . . The very object of these laws is monopoly.” E. Bennett & Sons v. National Harrow Co., 186 U.S. 70 (1902). But laws evolve and today courts usually apply a “rule of reason” approach when evaluating whether conduct unreasonably restrains competition, with the Supreme Court declaring “patent and antitrust policies are both relevant.” FTC v. Actavis, 570 U.S. 756 (2013).

Globalization further complicates matters. While a patent basically confers rights only within the country in which it is granted and the doctrine of comity disfavors interfering in the affairs of other nations, global manufacturing and sourcing of components, “is increasingly common in our modern global economy, and antitrust law has long recognized that anticompetitive injuries can be transmitted through multi-layered supply chains.” Lotes Co., Ltd. v. Hon Hai Precision Industry Co., Ltd., No. 13-2280 (2d Cir. 2014).

However, the test for application of the Sherman Act to foreign parties and foreign conduct has become increasingly clear, in particular with several U.S. cases decided earlier this year, one of which involved allegations of egregious patent licensing conduct in China. Continue reading →

Negotiation, Brinkmanship and the Government Shutdown

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Last month the world watched as the U.S. president and Congress brawled fiercely in a dispute over funding of the federal government, failing to reach agreement for weeks, forcing the government to partially shut down, laying off 800,000 workers and allowing the nation to hurtle recklessly towards financial default. Warren Buffet called it “pure idiocy.” The U.S. Treasury called it potentially catastrophic.

But was the drama a display of utter incompetence, or reasonable tactics employed by skilled negotiators, fully conscious of the risks and acting within the constraints of the circumstances to maximize gains for their constituents? Regardless of one’s political affiliation, it’s interesting to examine the events to see if they may impart any lessons for those who negotiate business agreements. Continue reading →

Trade Secrets and Employee Mobility in the U.S. and Asia

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In 2010, Hewlett-Packard sued its former CEO for threatened misappropriation of trade secrets, after he took a position as President of Oracle. In 2012, Taiwan’s Acer, Inc. sued its former CEO for breach of a non-competition agreement after he quit and took a top position at Lenovo. And last month, criminal charges were filed against five employees of Taiwan’s HTC Corp., for allegedly conspiring to form a competing company using secrets stolen from HTC.

Employers often spend considerable resources recruiting, hiring and training key talent, only to face potential disaster when those trusted employees quit to join a competitor, often taking sensitive files on their way out the door. Even if they don’t act in bad faith, departing employees carry critical, confidential information inside their heads, which can’t be deleted. Fortunately, various remedies may be available for the former employer, from confidentiality and non-competition agreements, to lawsuits for actual or threatened misappropriation of trade secrets and the doctrine of inevitable disclosure.

But there’s a conflict. Employers have a legitimate interest in preventing misappropriation of trade secrets, while employees have a legitimate interest in utilizing knowledge and skills gained through work experience and working for employers of their choosing. Courts and lawmakers have long struggled to establish a balance between those competing interests. Below is a general overview of relevant laws and practices in the U.S. and Asia. Continue reading →

Think Patent Arbitration Can’t Work? Think Again.

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When amicable efforts fail to resolve a dispute concerning patent rights and the aggrieved party wishes to pursue the matter further, it usually initiates litigation or perhaps a U.S. International Trade Commission (“ITC”) investigation, despite the huge costs of such options, because it may assume no other plausible alternatives exist to achieve the desired objectives.

Articles, such as this one, tout arbitration as an alternative: faster, cheaper and more confidential than litigation, with other benefits as well. Apparently the U.S. Supreme Court agrees, having described the Federal Arbitration Act (9 U.S.C. §1, et seq.) as evidencing a “national policy favoring arbitration” (Nitro-Lift v. Howard); and recognized “an emphatic federal policy in favor of arbitral dispute resolution” (Marmet Health Care v. Brown). Likewise, the Patent Act provides at 35 U.S.C. §294(a) that any arbitration clause contained in a patent agreement shall be presumed valid, irrevocable and enforceable.

However, in actual practice, relatively few patent disputes are submitted to arbitration. Worldwide, only a few hundred requests to arbitrate patent disputes are filed each year. By comparison, in 2012 more than 5,000 patent lawsuits were filed in U.S. District Courts, not to mention courts of other nations. So what’s the problem? If arbitration is so great, why are so few patent disputes resolved in arbitration? More important, are patent litigants missing something? Should they rely on arbitration more often? Continue reading →

10 Tips for Managing Litigation for Superior Results and Cost Savings

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Earlier this year, a U.S. District Court approved the payment of $308 million in attorney fees to 116 law firms in a single case (In re TFT-LCD Antitrust Litigation, N.D. Cal.), with one firm receiving $75 million in fees and another receiving $49 million. While that case may be an extreme example, the median hourly rate for partners in U.S. law firms is $625 per hour and the average patent lawsuit requires $2.5 million in attorney fees. Is it any wonder people complain about attorney fees?

Fortunately, by managing litigation effectively, those costs can be greatly reduced. For several years I served as Director of Legal at a multi-billion dollar tech company based in Taiwan and was responsible for resolving all disputes and litigation. Cost-down was our corporate mantra, with every invoice closely scrutinized by management. Below are a few of the lessons I learned. Continue reading →

Ten Tips for Successful Outbound Technology Licensing

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In this age of endless corporate cost-cutting, it might seem the only way to compel a company to license ones technology is through litigation or threats of litigation. After all, why would a company agree to pay large sums of hard-earned dollars for the use of intangible property unless it absolutely has to?

Well, they do. While patent lawsuits grab the big headlines, plenty of licensing takes place without threats or coercion. Often it results from business discussions between willing participants. The licensor may be unwilling or unable to fully develop and commercialize its technology, while the licensee may believe use of the technology will generate increased revenue or other benefits that should outweigh the costs of licensing.

Take Microsoft, for example. They license out a variety of technologies that improve the performance of computers, monitors, keyboards and more. But, they hit a jackpot with their android patents, licensing their technology to cell phone manufacturers who paid more than $400 million in licensing revenue in 2012. Or consider IBM, Intel, Qualcomm and Texas Instruments, each generating roughly $1 billion in annual licensing revenue. Of course, those are extreme cases, but the point is licensing deals are often entered into not in response to litigation but as a strategic, mutually-beneficial business transaction.

Of course, it’s not easy locating potential licensing partners and convincing them that paying royalties makes business sense. In fact, it usually requires a great deal of work. But, technology licensing agreements are often negotiated as a business deal, with the licensor wielding a carrot not a stick, sparing both parties the stress and expense of litigation. I know, because my former employer, on several occasions, succeeded in doing the same.

Here are 10 tips intended to help your company out-license its technology through business means. Continue reading →

Compelling Involuntary Depositions of Inventors in Taiwan

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It is common in U.S. patent litigation for a party accused of infringement to seek to depose inventors of the patents-in-suit. If the inventors are officers, directors or managing agents of a party and live or work in the U.S., it should be a routine matter to compel their depositions pursuant to the federal rules of civil procedure (FRCP). If the inventors are located outside the U.S. and do not consent to be deposed, the process is more burdensome, but often their depositions can be compelled pursuant to the provisions of the Hague Convention or other relevant treaty.

However, the process may be especially difficult if the inventor is located in Taiwan, is unwilling, and is no longer, or never was, employed by a party. First, Taiwan is not a signatory to the Hague Convention, so any attempt to compel the unwilling witness will have to proceed by way of letters rogatory. Second, if the inventor is not an officer, director or managing agent, the FRCP won’t apply and one must find another legal basis for ordering the testimony.

A number of courts have found that legal basis in the invention assignment agreement that the inventor signed in order to give up his rights in the patent. Invention assignment agreements usually contain language requiring the inventor to render certain assistance to the assignee of the patent. Depending on the particular facts and contract language, it is not unusual for a U.S. court to order a party to produce a foreign inventor to testify at deposition or trial, overseas or in the U.S., based on the notion that the assignment agreement gives the party “control” over the inventor.

What the courts gloss over is the extreme difficulty a party may encounter attempting to compel the inventor to comply with the order if the inventor refuses. In Taiwan, in particular, parties generally lack such control. Continue reading →