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
Defendants 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
“Father of the microcontroller,” Gilbert Hyatt, who has been granted over 70 patents, generating more than $350 million in royalties, and won a $388 million award against California’s Franchise Tax Board for wrongful harassment, has been waiting more than 40 years for the USPTO to respond to his pending patent applications.
Sounds crazy, but it may be true. Read his amazing story here: HERE
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
In the United States, attorneys, judges and others have struggled for decades to determine when, if ever, computer programs or software should be eligible for patent protection. In the 1960’s the U.S. Patent Office declared that software could not be patented. Since then, a series of court decisions have rejected that view and established that one may definitely patent software in the U.S., although the exact requirements remain unclear and critics increasingly demand that it should not be patentable.
As a starting point, 35 U.S.C. §101 provides that any new and useful process, machine, manufacture, or composition of matter, or new and useful improvement thereof, is eligible for patent protection, subject to other requirements of the Patent Act (that is, §101 is just the threshold test for patentability). Congress has never stated any limitations to the patentable categories of §101 and case law has only recognized three categories of exceptions – subject matter that may not be patented: laws of nature, physical phenomena and abstract ideas. Computer software is often found to be ineligible on the ground that it comprises abstract ideas, but courts have struggled to provide a precise formula or definition for abstract ideas. Continue reading
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
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
Due to the costs and difficulties of taking depositions outside the U.S., one should usually search for alternate solutions first. Try to limit the scope of required foreign evidence, obtain the evidence through other means, obtain it from the target’s parent company, subsidiaries, affiliates, employers or officers who are located in the U.S. or, if possible, convince the witnesses to fly to the U.S. to be deposed.
When such tactics won’t suffice, depositions can be taken in Asia, but one should prepare carefully to ensure the process will be successful and testimony will be admissible in court. If the depositions will take place in Japan, several months will be required just to reserve a room in the embassy or consulate and obtain required visas. Even in less rigid countries, it can be daunting lining up qualified interpreters, stenographers and making other critical arrangements, while ensuring compliance with applicable U.S., foreign and possibly international laws.
Consequently, prudent counsel will prepare well in advance, seeking stipulations from opposing counsel, informing the presiding U.S. judge of the plans, obtaining necessary orders, and retaining foreign counsel to assist with foreign laws and logistics. Continue reading
Last month a U.S. district court asked, “When service of process absolutely, positively has to be effected on a Taiwanese defendant pursuant to Federal Rule of Civil Procedure 4(f)(2)(C)(ii), is Federal Express enough?”
The case, SignalQuest v. Chou, involved allegations of U.S. patent infringement. After filing the Complaint and failing to convince defendant’s counsel to accept service of process on defendant’s behalf, plaintiff’s counsel filed a request for consent to serve Mr. Chou at his business in Taiwan by FedEx.
Federal Rule of Civil Procedure (FRCP) Rule 4 allows process to be served on a foreign defendant by any internationally agreed means of service, such as means permitted by the Hague Convention, but Taiwan is not a party to most international agreements, including the Hague Convention. Continue reading