Category Archives: Intellectual Property

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 →

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 →

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 →

Defending Patent Licensing Demands (III of III)

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III. Prepare for Battle

In Parts I and II of this series, we discussed how to evaluate and respond to licensing demands and search for internal solutions. In this post we’ll discuss what to do when such efforts fail and litigation seems imminent.

Should one obtain a non-infringement opinion? Perhaps during product development, if one fears a particular patent, but after that it’s probably not worth the cost. In the U.S., failure to obtain an opinion may help support a finding willful infringement and enhanced damages. But most demands won’t go to trial and obtaining an opinion does not guarantee protection from enhanced damages.

It might be more helpful to explore potential cooperation with similarly-situated parties. If multiple parties share common issues, they may share legal costs and coordinate strategy by entering into a Joint Defense Agreement. However, before sharing information, be sure to enter into a Common Interest Agreement to help preserve confidentiality with respect to third parties. Continue reading →

Defending Patent Licensing Demands (Part II of III)

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II. Search for Solutions

In Part I of this series, we discussed how to evaluate and respond to a licensing demand, acknowledging the demand but requesting further information. Often that will be the end of the matter. This post will discuss what to do when the demanding party persists.

Try to pass the buck, if possible. If use of the patents arises from compliance with a customer’s requirements or specifications, talk with your business unit about requesting the customer to license the patents directly or reimburse your company for the cost of licensing.

If the patents relate to parts your company purchased, send each supplier a demand to either license the patents or defend and indemnify. Even if you have no signed agreements with the suppliers containing indemnification provisions, it still may be worth a try. Many jurisdictions recognize an implied warranty of non-infringement in connection with sales of goods, such as those found at UCC, Section 2-312(3) and UNCISG, Article 42. Ask your business unit to help exert pressure on the suppliers. And, consider switching to licensed suppliers if possible. Continue reading →

Defending Patent Licensing Demands (Part I of III)

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I. Evaluate and Respond to the Demand

According to a 2011 patent litigation study, the median patent infringement award in U.S. courts over the past 16 years was $5.1 million – and that doesn’t include attorney fees. Fortunately, most demands can be disposed of by in-house counsel, without licensing or litigation. This is the first of three posts discussing basic strategies for companies to resolve licensing demands internally at little or no cost.

The first step is to evaluate the severity of the demand. Examine the demand letter. Does it target your company specifically or appear to be part of a mass-mailing? Is it addressed to a named individual or “Dear General Counsel”? Does it identify specific products or refer broadly to a vague category of products? Is it phrased as a cordial invitation to “license early” or a firm notice of infringement?

Perform a Google search on the patent owner and patents. Are they well-known and feared or small and obscure? Have they been involved in prior litigation and licensing with major companies or is your company the first target? Are the patents registered where your company has substantial manufacturing or sales or not? Continue reading →