Friday, December 12, 2008

IP issues for small businesses

IPBiz notes the law review article titled Growing Pains: Intellectual Property Considerations for Illinois Small Businesses Seeking To Expand by William Lynch Schaller which appears in 35 Loy. U. Chi. L.J. 845.

Of "employee raiding"-->

When such sneak attacks are planned on company time n523 using company computers n524 or other company assets, n525 in addition to company personnel, they are especially likely to receive a chilly reception in court. These basic principles should never be forgotten, as many intellectual property disputes find their inception in precisely such "jumping ship" facts. At the very least, fiduciary duty charges will trigger wide-ranging discovery that may lead to unexpected intellectual property claims. n526

Of licensing-->

Assuming a license is otherwise valid, the parties to a licensing deal need to give serious thought to their relationship going forward. Their interests obviously are adverse: the licensor wants to receive the maximum royalty, while the li-censee wants to pay as little as possible. Given this inherent tension, consider what happens if the licensee takes an exclusive license and then comes up with a superior product by designing around the patent. The licensee at that point has no incentive to push the licensed product, preferring instead to promote its own. One solution here would be for the li-censor to bargain for a minimum royalty as opposed to a best efforts exploitation obligation on the [p. 919] licensee's part. n423 Other solutions include substantial fee payments up front and milestone payments as commercialization goals are realized. These compensation terms, of course, necessarily will vary with the nature of the license and its scope.

Of patent ownership-->

An all-important and frequently litigated issue involves employee patent ownership. At common law an employee hired to invent owed a duty to assign patent rights to his or her employer; a non-inventive employee did not have such an obligation. n390 In the latter situation the employer may have only a limited shop right in the employee's invention if the employee used the employer's time and materials in coming up with the invention. n391 These rules can be difficult to apply in some instances, however, such as where the employee's duties are unclear. n392 Employers usually avoid ownership issues by requiring employees to sign invention assignment agreements at the outset of [p. 914] employment, n393 a practice that generates controversy in fields such as academic research. n394 These contracts sometimes include trailer clauses covering inventions developed shortly after termination. n395 However, an employee agreement purporting to cover an invention unrelated to the employer's business and developed without using the employer's time and materials is invalid under the Illinois Employee Patent Act. n396.

BUT see 8 JMRIPL 80 (2008) on ownership of inventions wherein inventors work for different companies, covering the recent Lucent/Microsoft/Fraunhofer matter (543 F.3d 710 (Fed. Cir. 2008)).

[Cross-reference to Lemley and Pooley, California Restrictive Employment Covenants after Edwards discussing Edwards v. Arthur Andersen.]

Separately, of copyright ownership, note that, in copyright (unlike in patent), there is a work-for-hire doctrine, such that if the employer hires the employee to do work (for example, create a sculpture), the employer can end up owning the copyright. However, the employer must pay the employee to do the job in question. For independent works of creation ownership of copyright does NOT vest in the employer. Thus, for example note the independently-created work "There's Always Something There To Remind You", Intellectual Property Today, page 49 (May 2003) which appears, without author attribution, on the website of a former employer.

Endnote 1 of the article in IPT states: n1 The opinions expressed herein are to foster academic discussion and debate, and should not be imputed to any employer of the author, past, present, or future. The author may be reached at, or 609-514-5951. The author obtained a Ph.D. from Stanford University and a J.D. from the University of Chicago, and he has written articles cited by the U.S. Supreme Court and by a Nobel Laureate. The title of this article is a variant of "(There's) Always Something There to Remind Me," written by Burt Bacharach and Hal David, and performed by (among others) Dionne Warwick. The author notes the sad murder of attorney Delores Marie Harrison in Hamilton, New Jersey in April.

The May 2003 article began: Five years ago, in May 1998, the New York Times ran a story on the efforts of Carl Malamud to make the contents of the U.S. patent database freely available. n2 The rest is history, and it is hard to imagine a world without general, ready, and free access to the texts of U.S. patents. Things are different because of the actions of Carl Malamud. Also in May 1998, the Wall Street Journal (WSJ) ran a story, "Whatever Happened to the Buckyball?" Five years later we are still wondering. n3 Even though the WSJ tipped us off that there was a severe gap between promises and reality as to fullerenes, the hype continues. Thus, in April 2003, when we read about this "dream material easing into the limelight" for applications, battery technology, fuel cells, semiconductors, and medicine, n4 we might want to ask: what's been going on for the last ten years? Looking back into history is a major theme in patent law. We frequently have to ask: what did you know, when did you know it, and how can we tell that you really possessed it?

IPBiz notes that May 2008 has come and gone, and at the 10 year point, we are still wondering whatever happened to the buckyball.

Note also It's Bound To Scare You, Boy, Intellectual Property Today, page 46 (March 2003), first endnote:

The opinions are to foster scholarly debate, and are not necessarily those of any employer, past, present, or future. The author may be reached at The author was a Fannie and John Hertz Foundation Fellow at Stanford University, and obtained a Ph.D. on work involving intercalation compounds of graphite. Related to an article on Festo [The Supreme Court's Festo Decision: Implications for Patent Scope and Other Issues], one notes that, simply as a technical matter, some carbon materials behave as metals. See for example L. B. Ebert and J. C. Scanlon, The Relationship of Chemistry to Electronic Properties of Graphite Intercalation Compounds, IEC Product R&D, 1980, 19, 103 and note the journal "Synthetic Metals," on which editorial board this author once served. Separately, some carbon materials have diamondlike properties. See L. B. Ebert, et al., Ore Geology Reviews, 1990, 5, 423-444, and also note the work on diamondoids, J. E. Dahl, et al., Science, 2003, 299, 96-99. The author obtained a J. D. from the University of Chicago in 1993; his comment for law review (published in TMR) was cited by the Supreme Court in the Qualitex case. The title of the article is from the words of "Eve of Destruction," written by P. F. Sloan and sung by Barry McGuire. An alternate title was "1984: Reprised in Binary Colors?"

Note also The Things We Lean On Are Things That Don't Last, Intellectual Property Today, page 26 (February 2003).

Note also Just The Facts, Ma'am, Intellectual Property Today, page 9 (January 2003) which began:

The television show Dragnet n2 popularized the concept that anything you say can and will be used against you. There was a never a suggestion that your silence could be used against you. Recent court cases have suggested that silence in patent prosecution can and will be used against you.

n2 See Broadcasting and Cable, Vol. 130 (July 3, 2000) ([the requirements of the Miranda decision] became a staple of TV crime shows, perhaps most notably Jack Webb's Dragnet). Jack Webb starred as Sergeant Joe Friday in Dragnet which ran from 1952-1959 and from 1967-1970. See also Steven Stark, 42 U. Miami L. Rev. 229 (1987). See also Dickerson v. U.S., 530 U.S. 428, 120 S. Ct. 2326 (2000); U.S. v. Chapdelaine, 616 F. Supp. 522 (D RI 1985); Legree v. Greiner, 2001 WL 527423 (SDNY).
On October 31, 2002, in Inverness v. Warner-Lambert, n3 the Federal Circuit referred to Elkay Mfg. Co. v. Ebco Mfg. Co., 192 F.3d 973, 979, 52 USPQ2d 1109, 1113-14 (Fed. Cir. 1999) for the proposition that failure to respond to an examiner's reason for allowance functioned as a disavowal of a different interpretation of the claim. Although this is an overstatement of the text in Elkay, n4 it is not necessarily an incorrect statement of current law.

***Also, from the IAM blog-->

IP more important than ever in M&A deals, new research claims

Corporations and private equity firms both believe that the importance of IP in M&A deals is set to increase over the next five years, according to a study published yesterday. Conducted by mergermarket and sponsored by CRA International and K&L Gates LLP, M&A Insights: Spotlight on Intellectual Property Rights reports that, in addition, IP is seen as being equally or more important than other assets by 85% of corporate respondents and 72% of private equity respondents.

Other highlights include:

• Respondents differed in their views about IP valuation. When asked how often they value IP assets, 32% of corporate respondents report that they always explicitly value IP assets. On the other hand, 44% of private equity respondents say they value IP assets less than a quarter of the time.

• The majority of all respondents (80%) believe that the most common consequence of insufficient due diligence is the failure to properly identify IP risks. However, corporate and private equity respondents differ about the causes of insufficient due diligence.


On discovery and Rule 26(g)

Of Malamud


See also Edwards v. Arthur Andersen LLP: The Death of Non-Competition Agreements? at The Labor and Employment Law Blog [ ], which concludes:

The California Supreme Court’s ruling in the Edwards case will have significant impact on California’s employers. Many employers utilize such agreements to protect their customer base from competitors, who may hire away the employer’s employees to take advantage of their relationships with customers. The Court’s decision in Edwards will deprive employers of this protection unless the California Legislature accepts the Supreme Court’s invitation to amend section 16600.


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