Category Archives: Doing Business

Protecting Trade Secrets

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As reported in the Wall Street Journal, notoriously secretive Apple Inc. was forced to divulge many diverse, and fascinating, trade secrets in its closely-watched litigation with Samsung (now in jury deliberation). Witnesses were compelled to testify concerning Apple’s development of the iPhone and iPad, its marketing budget and other sensitive matters, including – ironically – measures taken to protect the confidentiality of its trade secrets.

Unlike patents, a trade secret cannot gain protection through registration, but only through reasonable efforts to maintain its secrecy. For Apple, such efforts included “locking down” one floor in a building and installing cameras and keycard readers to ensure that Project Purple, their code name for development of the iPhone, would remain confidential. Team members were recruited only from within the company and were only told the nature of the project after they had joined the team.

While few of us deal with trade secrets of that magnitude, virtually every successful company has some commercially valuable information that derives its value from not being widely known. In a future blog post, we will address judicial, legislative and administrative issues relating to trade secrets, but this post concerns practical measures that should be considered to protect the confidentiality of trade secrets. Continue reading →

Rolling Forecasts: Minimizing Risks of Uncertain Supply and Demand

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When two companies enter in to a relationship for the manufacture and supply of goods, both sides often have legitimate concerns about the volume of future orders and production.

The customer seeks assurance that all of its orders will be filled, so it won’t be left in the lurch in times of high demand. The supplier seeks assurance that purchasing volume will remain steady, or increase, so its initial investment will be recaptured, profit margin will be realized and it won’t be stuck with a warehouse full of costly, unwanted inventory.

Those legitimate concerns on both sides may largely be alleviated through the artful drafting of several possible contract provisions. The variations are endless, but here are a few basics. Continue reading →

Technology Manufacturing Contracts: Don’t start work without ‘em.

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Here in Asia, it’s surprising how often technology companies will team up with a business partner and commence manufacturing, with no contract in place, placing trust in a few emails, oral conversations and purchase orders. I know, because they will then come to me, after problems have arisen, with questions about their legal rights. Regardless of whether the manufacturer is an ODM, OEM or contract manufacturer, much risk and uncertainty can be eliminated if the parties will first negotiate and sign a basic manufacturing agreement.

Below are a few key terms that may be clarified in such agreements.

Product and Pricing. Naturally, the agreement should include precise descriptions of the product, packaging and pricing, including design, specifications, materials, components, logos, and so forth. Such items are best described in addendums to the agreement, so they may be easily modified as needed. The agreement may also describe the process for making any price adjustments.

Quality and Inspections. The agreement should specify all governmental, environmental, industry, compatibility and customer quality requirements to be complied with, as well as required testing and certifications. It may permit quality audits by the customer (the customer may outsource that task if needed) and should clearly describe inspection rights and remedies for non-conforming products. Continue reading →

Joint Development Agreements: Proceed with Caution!

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Companies that wish to produce new technologies have basically three options: (a) develop the technology, (b) purchase or license it, or (c) jointly develop it with others. That third option is popular, as it allows two companies to share their respective strengths, resources and expertise and benefit from a synergistic business relationship. It is also risky, because each party relies on the other and may be required to share sensitive trade-secrets, know-how and other intellectual property rights. However, handled properly, the risks can be minimized and a mutually beneficial relationship can flourish.

Typically, such collaborations utilize a succession of agreements, starting with an NDA, followed by a Joint Development Agreement, then perhaps Manufacturing, Purchasing and Licensing Agreements. This article will focus on the Joint Development Agreement.

First, the agreement should clearly identify the parties and their objectives. What is the goal of the collaboration? What technology is being developed? Do the parties plan to manufacture or sell products? Where? When? Which party will have such rights and will they be exclusive? What is the expected timeframe? What are the milestones? Greater certainty up front will reduce future disagreements. Continue reading →

10 Tips for Drafting Non-Disclosure Agreements

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Like Rodney Dangerfield, Non-Disclosure Agreements (“NDAs”) often get no respect. Business persons may plunge into negotiations, revealing confidential information with no agreement in place, or Legal may issue the same form agreement in every case, as if one-size-fits-all. Well, like any contract, the NDA can provide vital protection, but should be drafted with care. Here are 10 tips to consider.

1. Nature of the Obligation. Naturally, the heart of the NDA is language prohibiting one party from wrongfully using or disclosing certain information received from the other. The agreement should require the recipient to use at least the same degree of care that it would use to protect its own confidential information, but at least a reasonable degree of care.

2. Mutual v. Unilateral. Legal should inquire with Business to learn what types of information will be disclosed by each party. Obviously, the disclosing party wants stronger protection; the receiving party wants fewer restrictions. Nonetheless, in almost every case each party will disclose some sensitive information, so it almost always makes sense to include mutual confidentiality obligations. Continue reading →

U.S. Patent Liability based on Foreign Sales or Manufacturing

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Can a Taiwan company that manufactures products in China and delivers them in Hong Kong, pursuant to contracts signed in Taipei, be held liable for infringing U.S. patents based on those transactions, even if it never imports the goods to or does business in the U.S.? Surprisingly, yes.

Direct Infringement. Under Section 271(a) of the U.S. Patent Act it is unlawful to make, use, offer to sell, sell or import in/into the U.S. any device that makes use of a valid patent, without authority from the patent owner. To do so constitutes direct infringement.

It’s not always clear what constitutes U.S. sales. In MEMC v. Mitsubishi, a Japanese supplier sold goods exclusively to a Japanese customer, but placed shipping labels on the products indicating a U.S. destination and otherwise helped facilitate importation by the customer. Nonetheless, a U.S. court found the supplier didn’t engage in U.S. sales.

However, in LightCubes v. Nothern Light, the court found a supplier engaged in U.S. sales despite delivering the goods in Canada, because it sold them to U.S. customers. And in SEB v. Montgomery Ward, the court found U.S. sales despite delivery in Hong Kong, because the supplier manufactured the goods with North American electrical fittings, affixed U.S. trademarks on the goods, and stated U.S. destinations on the invoices. Continue reading →