Category Archives: Intellectual Property

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 →

Design Patents in China: Applications, Infringement and Enforcement

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Design patents have been making the news. Last summer, Apple’s $1.05 billion verdict against Samsung was famously based, in part, on the finding that Samsung infringed Apple’s rounded-rectangle and edge-to-edge glass designs. Since then, Yamaha, Thule, Oakley, Nike and Spanx, to name just a few, have litigated in the U.S. over the design of headphones, ski racks, sunglasses, footwear and women’s undergarments. And just last month, former head of the USPTO, David Kappos, published an OpEd piece describing design as “the new frontier of intellectual property.”

Nothing has fundamentally changed about the nature of design patents. The first US design patent was granted in 1842. The Statue of Liberty, Coke bottle, Volkswagen Beatle, Stealth Bomber and Star Wars’ Yoda are all protected by design patents. Design patents have long played an important role in consumer electronics, automotive, apparel, jewelry, packaging and other industries.

But industrial design is becoming increasingly important, Mr. Kappos explains, because the increasing functionality of man-made devices brings with it increasing complexity, so innovative companies are constantly seeking superior designs, a convergence of form and function that helps make the complex simple and sets their companies apart; and protecting such designs is critical.

While that explanation sounds reasonable, in China there are additional factors and – as always – the picture is complex and uncertain, but it is perfectly clear that companies doing business in China, from manufacturing to sales, should seriously consider the roles design patents can play with respect to brand protection, counterfeiting and unscrupulous business practices. Continue reading →

China’s Great Leap Forward in Patents

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On March 28, Apple Inc. appeared in court in Shanghai to defend charges that Siri, its voice-recognition, personal-assistant software, allegedly infringes a Chinese patent. The plaintiff and owner of the patent, Zhizhen Internet Technology Co., claims its version of the software has over 100 million users in China and is requesting the court to ban all manufacturing or sales of Apple’s product in China.

This was not the first time Apple faced patent infringement claims in China. Last summer a Taiwanese man sued the company in China for alleged infringement relating to its Facetime technology; in 2010 a Shenzhen company threatened to sue concerning iPad design; in 2008 Apple was sued for the iPod; and in 2012, a Hong Kong company launched GooPhone I5, an android-based replica of the iPhone 5, reportedly based on leaked photos of the iPhone. GooPhone claimed to have patented the design and threatened to sue Apple if it dared to sell the genuine article in China.

Nor is Apple alone. French company, Schneider Electric lost a $48 million patent infringement verdict in China and Samsung lost one for $7.4 million. Sony, Phillips, Canon and Dell have all had their battles and GooPhone sells knockoffs of other smartphones in China with apparent impunity. Of course it’s possible in some cases the Chinese technology may be first and the Chinese patent legitimate. However, foreign companies face a growing risk that Chinese entities may unscrupulously patent foreign technology in China and demand a toll to do business there. Not only that, but in coming years companies will increasingly face challenges worldwide from the growing landslide of patents coming out of China. Continue reading →

Managing Costs of Patent Litigation

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For several years I was the lead attorney at a Taiwan company that manufactures technology and consumer electronic products, from light-emitting diodes to liquid-crystal displays. Every month we received a new demand for patent licensing or indemnification and it was my job to dispose of them at no cost, without licensing, litigation, or outside counsel. Usually it was possible, but occasionally we found ourselves mired in full-blown litigation.

It’s no secret patent litigation costs are immense. According to the American Intellectual Property Law Association, the cost of an average patent lawsuit, where $1 million to $25 million is at risk, is $1.6 million through the end of discovery and $2.8 million through final disposition. Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model.

However, whether one represents a plaintiff or defendant, manufacturer or NPE, there are actions one can take to help manage the costs.

Below are some general guidelines. 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 →

Strategic Monetization of Patents

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The value of all U.S. generated intellectual property is said to be approximately $5.5 trillion, equal to nearly 40% of the U.S. economy. From time to time that value is dramatically demonstrated, such as when Apple wins a $1 billion patent infringement verdict against Samsung, when Nortel sells a portfolio of patents for $4.5 billion, or when Google acquires Motorola Mobility for $12.5 billion, to gain control of its patents.

However, for many companies the cost of obtaining and maintaining intellectual assets – in particular patents – may be a huge waste of corporate resources, either because the company files patents indiscriminately, without sufficient consideration for which technologies, markets and regions may be most deserving of investment, or because it fails to devise and implement a sound plan for monetization of the patents.

Monetization of a patent portfolio usually begins with an IP audit. Working with the company’s business units and engineers, one should evaluate the company’s patents and divide them into three or four categories: those which are presently being used by the company; those which are not being used, but might have value to others; and those which are not being used and appear to have little value. One may also distinguish between patents that relate to the company’s core v. non-core technologies. 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 →

Patent v. Trade Secret: Which is better?

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A few weeks ago, Taiwan’s second largest LCD panel-maker, AU Optronics (AUO), accused two of its former executives of selling AUO’s valuable manufacturing secrets to China’s second largest panel-maker, China Star Optoelectronics. AUO sued and Taiwan’s authorities launched a criminal investigation, but the former workers have both accepted employment with China Star and now AUO will presumably face a tough battle to prevent its competitor from using its secrets.

Some may wonder, if the secrets were so valuable why didn’t AUO patent them? After all, patents – not trade secrets – seem to make all the big headlines and manufacturing processes are patentable in most countries, provided they meet the basic requirements for patentability.

The answer is that patents tend to capture more glory than trade secrets, but each method of protection has distinct advantages and disadvantages. Neither is superior in all cases. A prudent company will choose one method or the other, in each particular case, based on a careful analysis of various factors. Continue reading →

Trade Secret Litigation in Taiwan

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One of my former employers in Taiwan lost several employees to a competitor. Before leaving, the employees downloaded numerous files of sensitive financial information which they took to their new employer and used to try to steal our customers. We notified the authorities, the police launched a raid on the new employer, searched their computers, discovered the stolen data and another trade secrets battle had just begun.

Such cases are common; they’re also notoriously challenging. In Taiwan, the Trade Secrets Act prohibits the unlawful misappropriation, disclosure or use of trade secrets. Trade secrets are defined as business or technical information that is not known to the public, derives value from its secrecy, and is the subject of reasonable measures taken by its owner to protect its secrecy.

If trade secrets are unlawfully acquired, used or disclosed, the Act authorizes a civil suit for injunctive relief or damages. However, the basic measure for damages is plaintiff’s lost profits or defendant’s unlawful gains, both of which can be hard to prove. Additionally, Taiwan’s discovery procedures are practically non-existent, so it can be difficult proving knowledge and use of the secrets by the company receiving the secrets. Without that, all one has is a potential case against the individuals and no real proof of damages. Continue reading →

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 →