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

Maximize Royalties through Strategic Licensing Audits


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

Why Bother with Corporate Compliance?


Corporate bribery is in the headlines. Last week, the media was reporting accusations that Hong Kong’s top government official took $6.4 million in bribes from an Australian engineering firm. Before that, a top official in China’s central planning commission admitted taking $5.8 million in bribes from Toyota and other companies, and a Chinese court fined GlaxoSmithKline (“GSK”) $500 million for bribing doctors. Before that, Alcoa settled bribery charges in the U.S. for $380 million, while Hewlett-Packard settled charges for $108 million.

Each time, the news is followed by a flurry of articles from corporate compliance experts urging companies to take ethics and compliance more seriously, including obtaining full support of the CEO and Board, assigning oversight responsibility to high-level personnel, allocating resources, implementing policies and procedures, providing regular education and training, incentives and discipline, performing continuous auditing, monitoring and fine-tuning, and responding promptly to any violations.

Some may feel that’s a bit much, that, “Our company values ethics and integrity, but can’t afford a full-blown compliance program.” In truth, most global companies can’t afford not to implement such measures, and it’s not just about bribery. Below are some reasons why companies should honestly assess their compliance programs and make earnest efforts to plug any gaps. Continue reading

$500 Million Price-Fixing Sentence Affirmed against AU Optronics

illegalLast week the Ninth Circuit Court of Appeals affirmed criminal convictions against AU Optronics (“AUO”), a Taiwanese maker of Thin-Film Liquid Crystal Display (“TFT-LCD”) panels, its U.S. subsidiary and two of its top executives, for illegal price-fixing that resulted in prison sentences of thirty-six months for each of the individuals and a $500 million fine for AUO. The case offers many stark lessons to global manufacturers whose employees may communicate with competitors about the pricing and supply of their products.

Initially, AUO was one of several leading TFT-LCD manufacturers indicted in the Northern District of California for conspiring to fix prices for TFT-LCDs in violation of the Sherman Antitrust Act, based on a series of meetings that took place between the alleged conspirators. In the meetings, the defendants discussed prices at which they would sell TFT-LCDs to their U.S. customers, including Dell, Compaq and HP.

AUO was the only accused company to take the case to trial, with rivals including LG Display, Chunghwa Picture Tubes, Chi Mei Optoelectronics and Sharp Corp. all pleading guilty and paying a total of more than $890 million in fines. At trial, the jury found AUO and its executives guilty and imposed the $500 million fine. The Ninth Circuit affirmed the AUO convictions and fine. While the decision addresses many points, a few are particularly noteworthy. Continue reading

Best Practices for Licensing Patents to Companies in China

Patent licensing generally is fraught with risks, but licensors who do business in China face special challenges. Common practices and contract provisions that may work elsewhere often prove ineffective in China. Consequently, before entering into such an arrangement, the prudent lawyer will review some of the key issues faced by licensors in China.

Notably, foreign companies are increasingly being forced to defend their licensing terms before China’s antitrust regulator, the National Development and Reform Commission (“NDRC”). US patent-assertion entity InterDigital recently settled a dispute with the NDRC, by agreeing to lower its royalty rates in China and make other changes to its terms. The NDRC raided Qualcomm’s Beijing and Shanghai offices and launched an investigation into the US chip-maker’s licensing terms. And, when Microsoft announced plans to acquire Nokia’s business (but not its patents), several competitors demanded China’s government impose restrictions on the deal, prohibiting Microsoft and Nokia from raising their licensing rates in China.

But anti-trust compliance is just one challenge faced by licensors in China; other challenges relate to restrictions on technology imports, under-reporting of royalties, difficulties with audits, dispute resolution and more. This article will summarize a few relevant laws and challenges licensors should be aware of and best practices for dealing with them. Continue reading

Microsoft to Close Nokia Deal by Friday


Microsoft announced it will complete its US$7.5 billion acquisition of Nokia’s cellphone business by Friday, April 25, including over 30,000 staff, a wide range of devices and Nokia’s CEO, who will report directly to Microsoft’s CEO.

The transaction will allow Microsoft to compete directly against Apple, Samsung and other cell-phone makers and allow Nokia to focus on generating revenue from its extensive patent portfolio.

Chinese antitrust regulators finally gave their approval to the deal earlier this month, while South Korea’s regulators still haven’t given their approval, but the parties claim approval from Korea is not required to close the deal. Continue reading

Wage-Fixing Suit v. Tech Giants Moving Forward to Trial

wage-fixing suitDefendants Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar lost an attempt to dispose of by summary judgment a wage-fixing lawsuit filed against them by 64,600 engineers, designers, quality analysts, artists, editors, and system administrators employed by the seven companies.

In the fascinating class-action lawsuit, the plaintiffs contend the defendant tech companies colluded to not hire employees away from each other, thereby reducing competition and lowering wages. On Friday, US District Court Judge Lucy Koh quashed the plaintiffs’ motion for summary judgment, so the case will move forward to trial.

Read more about the case HERE

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

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

Battling Trade Secret Theft in Taiwan

Here we go again. Last week, police detained three employees of Taiwanese smartphone-maker HTC, raided their homes and offices and seized their computers and cellphones to search for evidence, as HTC is accusing them of stealing sensitive technology to use in competition with HTC in China.

The three men – a vice president of product design, director of R&D, and senior designer – are accused of stealing secrets relating to HTC’s Sense 6.0 smartphones, which are scheduled for launch later this year. While the investigation is just beginning, reports have accused the three of collaborating with officials in Chengdu, China to form a competing smartphone company in China using the secrets stolen from HTC. They are also accused of defrauding HTC out of more than US$650,000, by use of forged documents, apparently to raise capital for their new venture.

Taiwan has seen similar cases before. In 2012, the nation’s second largest LCD panel-maker, AU Optronics (AUO), sued two of its former high-level executives for stealing trade secrets, which they took to their new employer, a major competitor in China. In 2011, Taiwan IC-design company, MediaTek, sued a former employee for stealing secrets and sharing them with his new employer. And, most famously, Taiwan Semiconductor Manufacturing Co. (TSMC) battled with its Chinese rival, Semiconductor Manufacturing International Corp. (SMIC), for almost a decade over allegations that SMIC poached numerous employees, who stole critical information that SMIC used to illegally manufacture competing products. Continue reading