Category Archives: Patents

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 →

Obtaining Discovery in the U.S. for use in Taiwan Legal Proceedings

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Any litigant in Taiwan who seeks discovery from a U.S. adversary will face serious challenges, because Taiwan’s legal system lacks a formal discovery system. There are no procedures for interrogatories, document production requests or depositions. Moreover, even if a litigant were to apply to the Taiwan judge and obtain an order requiring discovery responses from a U.S. entity, any attempt to enforce that order would have to be made from Taiwan to the U.S. through a cumbersome letters rogatory process.

However, there may be a solution under U.S. law. 28 U.S.C. §1782 states that the U.S. district court where a person or entity is located may order that person or entity to give testimony or produce documents or things, for use in a foreign or international tribunal, upon application of an interested person. So, is that the answer? May a party to legal proceedings in Taiwan use §1782 to obtain discovery from a U.S. party? Perhaps, but subject to certain limitations.

First, there’s the question of whether the demanding party qualifies as an interested person. Fortunately, if the demanding party is a litigant there should be no problem, as the U.S. Supreme Court has explained in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 254 (2004) that, “litigants are included among, and may be the most common example of, the ‘interested person’ who may invoke §1782.” 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 →

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 →