Global General Counsel

Patent Titans Move to Represent Patent Trolls

2012-01-24T10:34:00.001-08:00

I saw this article from the Wall Street Journal (dated January 23, 2012): http://online.wsj.com/article/SB10001424052970203750404577173402442681284.html

The article reports on two titans in the patent world moving from traditional law firms to their own outfits. Their new focus is representing clients who are so-called "patent trolls" – NPEs or non-practicing entities whose sole function is to collect patents to assert against other companies. While patent law has become more stringent in its requirements, (including limiting venue and prohibiting an NPE from requesting an injunction for sale of product against the other side), the upside for an NPE bringing a lawsuit against a producer and seller of goods is still very lucrative and the downside is relatively small. NPEs still can collect license fees at the "going rate" (to be proved in court). So, the risk is high to a potential defendant that it will have to pay the NPE something or pay their lawyers big fees to defend a lawsuit. On the other hand, the potential leverage against an NPE is low – there are very few counterclaims that can be brought against a company that doesn't make or sell anything. That means, a real company who produces product and contributes to the economy only has downside in these lawsuits. They have to slog it out to win against the other side, or pay (to settle, or in a loss).

I have been on the other side to both John Desmarais (Alcatel-Lucent v Foundry Networks), and Matt Powers, (Immersion v Sony Computer Entertainment). I found them both to be really tough, verging on mean, in their tactics. They both have an amazing reputation in the industry though. Part of me is disappointed, but I suppose I am not really surprised with their mercenary moves.

Support the Fordham Securities Moot Court Competition

2012-01-10T14:10:00.001-08:00

As a firm believer in the duty of every practicing lawyer to coach and mentor the next generation of good lawyers, I fully support practicing lawyers engaging with law students to help them advance their art and expertise. I was requested to pass this message on, soliciting practitioners to participate as judges in the Fordham University School of Law Securities Moot Court Competition. If you are so inclined, I encourage you to support this wonderful opportunity for budding lawyers.

Here is the information on the event:

Each spring, Fordham University School of Law hosts the Irving R. Kaufman Memorial Securities Law Moot Court Competition. Held in honor of Chief Judge Kaufman, a Fordham Alumnus who served on the United States Court of Appeals for the Second Circuit, the Kaufman Competition has a rich tradition of bringing together complex securities law issues, talented student advocates, and top legal minds.

The year's Kaufman Competition will take place on March 23, 2012 to March 25, 2012.

The esteemed final round panel includes Judge Paul J. Kelly, Jr., of the Tenth Circuit; Chief Judge Alex Kozinski, of the Ninth Circuit; Judge Boyce F. Martin, Jr., of the Sixth Circuit; Judge Richard A. Posner, of the Seventh Circuit; Judge Jane Richards Roth, of the Third Circuit; and Commissioner Troy A. Paredes, of the United States Securities and Exchange Commission.

The Kaufman Competition is currently soliciting practitioners and academics to judge oral argument rounds and grade competition briefs. No securities law experience is required to participate and CLE credit is available.

Information about the Kaufman Competition and an online Judge Registration Form is available on their website, www.law.fordham.edu/kaufman. Please contact Michael A. Kitson, Kaufman Editor, at KaufmanMC@law.fordham.edu or (212) 636-6882 with any questions.

1-Year Grace Period for “Public Disclosure” under the new U.S. Patent Legislation

2011-12-03T13:24:00.001-08:00

Today, I had a client ask about the effect of the Leahy-Smith America Invents Act (AIA) that was recently passed into law. He wanted to know how the new "first to file" rule affected the old 1-year grace period for an inventor publicly disclosing his invention before filing a patent application.

He said: "I think I recently read, and perhaps from you, that the U.S. just changed the law regarding who gets a patent with respect to the date of invention. The old law was first-to-invent, and the new law is first-to-file. Is that true? How does that apply to public disclosure? For example, if I disclose something publicly, do I have 12 months to file and then it becomes public domain?"

My response: Regarding your question, yes the United States law as moved to a "first to file" system. In priority disputes between patent applications, priority is given to the first inventor to file an application, or to the first inventor to disclose the invention to the public, if she or he then files within a year. An inventor on a patent application can no longer swear behind a reference; she or he can no longer certify under penalty of perjury that the invention was created before the date of a particular reference.

Note that there is some uncertainty as to what the new 1-year grace period to file after 'public disclosure' means. Senate legislative history and traditional use of the term in patent cases would apply it to any form of prior art, including a public use or a sale. That is the better view. But some have argued that it covers only published disclosures.

My best advice: File early. It is possible, though unlikely, that the grace period will be lost if based on sales or public uses.

The new "first-to-file" system applies to applications with effective filing dates after March 16, 2013.

ECJ Reaffirms Principle of Free Movement of Goods, Services & People With Respect to Television Broadcasts

2011-10-04T12:57:00.001-07:00

This week, the European Court of Justice reaffirmed the core principle of the foundation of the European Union: the free movement of goods, services and people across national borders.

The ruling trumps intellectual property rights and contract rights that would otherwise have restricted the ability to receive television broadcasts only to proper licensees within a particular member state.

The case arises out of the purchase by certain pubs (restaurant/bars) in the United Kingdom of foreign decoder cards, issued by a Greek broadcaster to subscribers resident in Greece, to view Premier League football matches. But, the broadcast rights owner, the Football Association Premier League (the "FAPL") grants broadcasters an exclusive live broadcasting right for Premier League matches on a territorial basis, usually defined by national borders of a particular EU state. In the United Kingdom, the broadcast rights were granted exclusively to SKY television. The purchase of the decoders to directly access the broadcast of the football matches directly circumvented SKY's exclusivity rights under contract, and the intellectual property rights to choose licensees of the FAPL.

But, the Court of Justice decided that the core European Union principle of freedom to provide services supporting healthy competition trumped any national legislation which prohibits the import, sale or use of foreign decoder cards. They held that such a prohibition cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend football stadiums.

Judgment in Cases C-403/08 and C-429/08

Football Association Premier League and Others v QC Leisure and Others

Karen Murphy v Media Protection Services Ltd

Multi-Defendant Patent Cases - Passé

2011-09-23T17:04:00.001-07:00

On September 8, 2011, the Senate approved the America Invents Act. The legislation contains many important changes that affect the rights of inventors. Some of the changes affect patent litigation strategy.

Of interest is the new prohibition on joining multiple defendants in a single lawsuit, unless there are common issues of fact or the cases arise out of the same transaction or occurrence. That the plaintiff alleges that the defendants infringe the same patent is not enough to allow them to be joined in the same lawsuit. The new prohibition applies to all lawsuits filed on or after September 16, 2011.

If multi-defendant patent litigation becomes a thing of the past, it is likely that the number of patent cases filed will increase significantly. So, too, will the costs incurred by plaintiffs. One tactic by so-called "patent trolls" has been to sweep in many defendants into a single lawsuit, banking on the hope that most will settle before trial, and before substantial costs are incurred zeroing in on a particular defendant's facts.

The new legislation will require many different lawsuits to be filed, each against a single (probably) defendant, where getting "lost in the crowd" in settling will be less appealing. Also, patentees suing multiple defendants will face separate challenges to the patent's validity and scope, each with potential collateral estoppel effect that could determine the outcome of all the other cases with respect to that patent.

And, with the cost to plaintiff "patent trolls" being increased, what happens to all those new plaintiffs' patent troll law firms out there? No doubt the number of lawsuits will increase with the litigation, but will it increase enough to support all those new firms? Maybe not.

Victory for Inventors!: Supreme Court of the United States Upholds the Higher Burden of Proof for Patent Invalidity

2011-06-09T18:18:00.001-07:00

Today the Supreme Court of the United States handed down its decision in the Microsoft v. i4i case. There, Microsoft challenged the long-standing standard of proof for patent invalidity requiring "clear and convincing" evidence to invalidate a patent, in favor of a lower "preponderance of evidence" standard. There, Microsoft argues that the heightened standard insulated "bad patents" from invalidity challenges and stifled competition.

The Court rejected the arguments and upheld the higher standard deferring to Congress' role to write and mandate laws. The Supreme Court opinion also noted that Congress had made many changes to the patent laws recently, but chose not to change the standard of proof." Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity," Justice Sonia Sotomayor wrote for the Court. "Since then, it has allowed the Federal Circuit's correct interpretation of §282 to stand. Any recalibration of the standard of proof remains in its hands."

At last, the Supreme Court has empowered "the little guy" a bit with this decision, after years of eroding patent rights. As powerful companies flouted the patent rights of small inventors often believing they take their technology because they can out-spend them in court, at least now, the "little guy" has a fighting chance, helping creative inventors realize value out of their inventions and stop wholesale stealing of their property.

ECJ Declares Proposed European and Community Patents Court Unconstitutional

2011-03-16T09:51:00.000-07:00

On 8 March 2011, the European Court of Justice handed down Opinion No 1/09, I held that the proposed agreement regarding a "community patents court" is not compatible with the provisions of the European Union Treaties. This may have dealt a fatal blow to the prospects of a single unified system for the European Union.

Company’s Identity Stolen!

2011-02-08T12:07:00.000-08:00

I write this blog more as a reminder and warning to all service providers out there. There are very smart scammers out there who steal the identity of companies, using real information of real companies to lure you in their scam.

Here is my story – it ends happily!

This last week, we were contacted via email to provide legal services to a company based in Hong Kong – namely dispute resolution with a couple of US customers. Of course, our first task was to do a bit of web-research on the company to see if this unsolicited request for help was legit. There, on the Hong Kong Trade Development Council website (a legitimate government sponsored site that promotes businesses based in Hong Kong) was the company page and information. The address and name of the manager matched the name of the person who emailed me, and matched the contact information in the email, including the address, fax and telephone number. Dun & Bradstreet had confirmed the listing. So far, so good. I emailed the fellow back, and requested the names and addresses of the customers so that I could check conflicts. The fellow duly emailed me back. Ok, good – legitimate customers; next step. I sent him the requirements for a retainer in advance of services, hourly rates etc. He emailed back all was fine and told me that a customer was going to make a payment for monies partially owed and he would have them send the check directly to me. He told me that his company’s board directed that my fee be deducted from the payment.

Bing, bing, bing!
Ok – the alarm bells went off on receipt of the first unsolicited email. They increased when I received the first response from a yahoo account – a free email account. Next alarm bell was the request not to have a telephone call, as his “English was bad.” My colleague, Jason Clark, also noticed that the email addresses changed in one email from yahoo.com.hk to yahoo.com.cn. Not good. The clincher was the third party “customer payment” from which we could “deduct our fees” before sending the balance back.

I emailed the fellow back and told him we required a wire transfer directly from the company account. Also, my colleague, Jason Clark, who has many contacts in Asia, telephoned the company with the help of a fluent Cantonese speaker. Unsurprisingly, we learned that the company’s real contact had never heard of us and had never contacted us. The alleged client was actually a thief who stole the company’s and the company manager’s identity to perpetrate a scam.

I want to emphasize that the company itself, the contact information and the name of the person who allegedly contacted me were absolutely legitimate. The scammer used that company name and the manager’s identity as a front. I learned we were not the only one to be contacted by such criminals, and luckily, we weren’t taken. I spoke to a fellow in Texas who actually went through with a similar transaction, received the check, cashed it, waited 3 days for the check to clear, and then learned it was fake after he had sent the ‘client’ (aka ‘scammer’) the balance. He was out personally nearly $200,000. I asked him whether he had contacted the authorities, and he said he had – but since 9/11 there are so many scammers, the authorities can only focus on the $4-5 million value cases. The Texan’s advice: demand a wire transfer directly into your bank account up-front.

I refer you to this great site and article: Dissecting a Scam at Scam of the Day. For me, the free email account was a tip-off (and certainly the change in email address domain name), as well as the request not to telephone. The request for us to cash a third party check and deduct our fees is evidently widely known as a “Money Mule” scam. This one is pretty sophisticated – we sniffed a scam, but the company information was real.

Long story short, I lost a bit of time, learned a bit more about scammers, but we lost no money! My advice - trust your first instincts, and demand a wire transfer up-front.

Problem Solving, Spring Cleaning and Meditation

2010-02-21T13:52:00.001-08:00

We were in a sticky-wicket. The business wasn't going as planned, and an unanticipated barrier arose which threatened to ruin everything. My colleague and team leader was about to surrender, and so we prepared. Then, when the 'night seemed darkest,' my colleague emailed me: Laura, I've been cleaning -- I think I understand and have a plan to overcome the problem. And so it began: a glimmer of hope, a solution, a 'rabbit-out-of-a hat.'

I am not surprised the beginning of the solution came while my colleague was scouring his bathtub. I, too, have found contemplation and meditation in the repetitive time consuming tasks of cleaning. Other activities conducive to problem solving for me have been gardening, writing responses to discovery in litigation and prayer.

The simple repetitive tasks that require some thinking, that also result in some satisfying achievement stirs the soul and the mind to solve problems. I think Camus' interpretation of the myth of Sisyphus captures some of this idea.

In The Myth of Sisyphus, Sisyphus was a very crafty king who defied the gods and tried to elude death. Sisyphus is condemned for eternity to roll a rock up a hill, but he is cursed, for when he reaches the summit, the rock will roll to the bottom again. Albert Camus' famous essay discussing the myth rejects the futility and desperation of the sentence, but instead find contentment in the work itself. The essay concludes, "The struggle itself...is enough to fill a man's heart. One must imagine Sisyphus happy."

In my view, Sisyphus achieved his goal, but knew he had to perform it again and again. This left him free for more noble thoughtful pursuits. My mundane parallel is cleaning: you achieve which is satisfying, but you know you have to do it again and again. This leaves your mind free to not worry about the task at hand, but rather solve deeper more complicated puzzles through contemplation and meditation.

Intellectual Property Rights in a Dance Video

2009-11-04T16:44:00.001-08:00

I have a fabulous exercise/dance instructor named Max. After class the other day, she told me that she was going to make her own exercise video, and asked me what would it take to (a) protect her work and (b) get the rights she needs to make the work. Her questions got me thinking – intellectual property rights in her work have a number of legal layers. Also, the music industry is notoriously difficult to navigate in trying to collect licenses to rights held by others. The below is a short summary of her rights, the rights she needs to license and the first steps needed to get them.

There are four potentially copyrightable works in the exercise video:

First, dance and exercise videos involve sequenced physical movements or "choreography."

Second, those physical movements are performed in a moment in time, and recorded on a video medium (such as digital imaging, or film in the 'olden' days).

Third, the dance videos involve the music – the tune and the lyrics – that are created by someone.

Fourth, that music is then performed – the sounds of the music are made - by others.

Each of the 4 pieces above that comprise the video creation may be separate copyrightable works in which Max may own the rights, or need to license the rights from others.

As for the choreography, itself, it can be Max's intellectual property if it meets the legal requirements.

Original. U.S. Copyright Law requires that a work be an "original work of authorship" in order to be eligible for copyright protection. The classic test of originality for a copyrighted is not novelty, but "whether the production is the result of independent labor." Even if Max was influenced by the choreography of others – albeit classical dance, salsa or Caribbean dance – as long as the work was not copied and Max designed her own combination of steps and movements, Max's choreography is new and original.

Fixed in a Tangible Medium of Expression. Choreographic works may be fixed through film, videotape, or any of several notational systems. Notably, fixation through film or videotape records the complete choreography, however it mixes one copyrightable work - the dance choreography (the design of the dance) with another copyrightable work - the performance (that particular time the choreography came to life). As a legal purist, these works should be considered separately, and therefore the notational system would best capture the choreographic work, and the video would best capture the performance. But, from Max's point of view, focused on commercial realities, the important thing is that the video recording does "fix" the work "in a tangible medium of expression."

Therefore, Max's video is protectable under the law as a copyrighted work.

Well, that's good, but does she have the right to distribute it with music (with an audio recording)? That depends on whether Max has or gets all the rights she needs to the music (the tune and the lyrics), and to the performance by the musicians who play the music.

The Music. The music in and of itself is a copyrighted work. The creator of the sequence of notes and lyrics owns the intellectual property rights in the music. So, for example, the song "Thriller" was written by Rod Temperton, and he held the original rights in the music.

The Recording. The recording of the music also is a copyrighted work. Michael Jackson's audio performance and recording of the Temperton song "Thriller" is a separate copyrightable work.

To get the rights to distribute the music and recording, Max can write her own music and perform it – but I suspect this isn't very practical. She can also write her own music and hire someone else to perform it, and lock in the rights to the recording contractually. Most practically, she can get the rights to use music written and performed by others.

These rights can be licensed directly from the creator of each the music and the performers, or through a record company who controls the rights, in the form of a master use and synchronization license. The master use license will give her (a) a license to the music – the tune and lyrics, (b) a license to redistribute the performance by the musicians, and (c) the right to redistribute in audio-visual format.

She also needs a videogram license from the record company or music publisher. There are more narrow licenses, but because she wants to release her video for sale to the public, she must also get this special videogram license.

Bottom line – the licensing of rights to redistribute music are very complex, and there may be more than one licensor who holds the rights needed. There are companies that provide music clearance services – they know who to go to to get the right rights. That should be her first stop.

So You Want to Trademark Your Logo? How do you find out if it’s taken?

2009-08-10T12:17:00.001-07:00

The other day, I was asked how to search to see whether a logo could be trademarked in the US Patent & Trademark Office. I think that in some ways, it is one of the easier areas to receive a trademark, as most designs have a uniqueness to them. On the other hand, the logistics of the trademark filing can be complicated in this area, due to the nature of having to categorize and describe the image or logo in a very particular way for registration that includes verbal descriptions and codes designated by the USPTO.

First, some general thoughts about trademarks. Trademarks are often among the most important and valuable assets of a business. A distinctive trademark allows a business to build public goodwill and brand reputation in the goods or services it sells. A trademark or service mark is any word, name, design, symbol or device (or any combination thereof) that identifies and distinguishes the source of the goods or services (respectively) of one business from that of others. There are a number of legal hurdles to receiving a trademark, all of which must be met with respect to a logo or design – they include that the trademark must actually be used in commerce with respect to goods or services, and the trademark is distinctive, not descriptive, amongst other requirements. But with respect to designs, the focus is on uniqueness of the design vis a vis those of other businesses providing similar goods or services.

Design marks and logos can be powerful intuitive identifiers of businesses. Design and logo trademarks actually have their roots in medieval times where business identified themselves by a sign – such as a picture of a shoe for a cobbler or a picture of a fish for a fishmonger. They were also important indicators of whether a business was part of a protected guild. In the 14th and 15th centuries, local guilds often developed reputations for the quality of their products, and when they did, the names of the towns or regions in which those guilds operated became repositories of goodwill. To maintain that goodwill, guilds needed to be able to restrict membership and identify and punish members who produced defective products. Guilds therefore required their members to affix distinguishing marks to their products so the guilds could police their ranks effectively. While these symbols emerged to benefit the guilds, the modern design or logo trademark is for the benefit of the logo trademark owner, and is a direct descendent.

Today, trademark designs often represent the success, status and source of goods in an impactful, quick way: THE SHELL design for gasoline, Nike Swoosh design, Target's dartboard logo.

To how can you tell if your logo or design is unique enough to register? Things get tricky. Humans have the ability to adeptly and quickly identify visual patterns, recognize them and categorize them. Unfortunately, computers are not so good at this. So, searching for an image or pattern over the internet or in databases is virtually impossible, given today's technology, unless the images are coded with numbers or words. You can search the USPTO website for registered design trademarks and service marks based upon the design categories, or design codes, that are assigned to the image – but you have to figure out the USPTO coding system, and carefully search for elements in your proposed design. There may be a number of design codes associated with a particular design, as the components often need to be identified separately. Here are a couple of examples:

First, a design mark can be one that is composed merely of standard type characters, type print block or stylized letters, but these do not need to be coded, because they are not considered to be designs. The stylized lettering may be trademarked in conjunction with the trademarking of the word or words actually expressed. To find these types of logos, you only need to search on the word itself:

Next, a design mark can be composed of one design component or several. Depending upon whether the component is considered 'distinctive' the mark may be coded as a unitary design or have multiple codes.

The building is coded as 07.03.06 (commercial establishments). The roof and the windows are not coded separately because they are not distinctive components; they merely form part of the entire building design.

Here, the design mark is coded for both the design as a whole, and the design component: 03.07.08 (heads of deer) and 03.07.07 (deer)

But these searches of the USPTO only get you so far. You still may not be entitled to receive a registration of your logo or design, if another business has used a similar trademark in commerce, and received common law rights to exclusive use of the mark for their goods or services. To search for these common law types of trademarks established purely through consistent use of the mark over time, other searches may need to be performed, including company name databases, trade publications and the Internet. Of course searching for images on the Internet still remains challenging.

Images courtesy of the US Patent & Trademark Office

By Global General Counsel

Formidable Corporations Join Exclusive Patent-Infringement-Defense Clubs

2009-07-29T08:46:00.001-07:00

Patent aggregators have been around for several decades now. Many aggregators have joined the new IP licensing model to collect patents and assert them against companies who manufacture goods. If they don't pay a royalty, the aggregator sues them for patent infringement. This licensing model gained great popularity amongst non-practicing entities – so called 'patent trolls' – whose only purpose is to monetize the value of the intellectual property. Funny though, many manufacturing entities wanted a piece of the IP-licensing revenue pie, and started their own non-practicing entities – a revenue generating arm or subsidiary – whose sole mission was to generate revenue from unused or undervalued patents. I raise this, because people seem to think non-practicing entities or patent trolls are only the greedy solo inventor, or the company whose sole business activity is licensing patents and doesn't make anything – that is patently false! These to patent-revenue-generating entities include some of the largest companies in the telecommunications and high technology industries in the world.

With the rise of patent infringement assertion of revenue generating patent portfolios against small and large companies alike, new models are evolving to try to reduce the volume of the patents available for purchase by patent-revenue-generating entities, and provide some form of leverage against the patent-revenue-generating entities when they do assert.

Earlier this decade, we saw the rise of patent aggregators like Intellectual Ventures and Thinkfire. These companies removed the patents from their manufacturing owners to shield them from counter-patent-infringement assertions, and have as their mission, the monetization of the intellectual property for their and their investors benefit. Unfortunately, these companies walk-the-fine-line of being patent trolls themselves, and many companies did not want to be a part of their oft-perceived immoral, yet lucrative, endeavors.

The newest crop of aggregators are defensive in nature (so far). A defensive patent aggregator purchases patents to take them off the market and keep them from being asserted against their club members. Here are a few:

Allied Security Trust. This club was formed in 2001 and includes in its membership Sun Microsystems, Motorola, Hewlett-Packard, Verizon, Cisco , Google and Ericsson. The members contribute to the operating expense of the trust, and the trust hold funds in escrow for the purchase of patents. Each member's escrow funds are used for the purchase of only those patents that it is interested in. The members who contribute to the specific purchase then receive a license to those particular patents. After a certain period of time, the patents are sold or donated. The Allied Security Trust does not litigate its patents.

RPX Corporation. Similar to the Allied Security Trust, but operating as an entirely independent business (funded by elite venture capitalists), RPX Corporation gives all of its members licenses to the all patents it purchases (with some deference for years of membership). The service is structured on an annual membership and payment of dues, and includes amongst its members: Cisco, IBM, Panasonic, Philips, LG Electronics, Samsung, TiVo, Hewlett Packard, Nokia, Sony and Epson. RPX does not rely on its members to recommend or approve the purchase of patents (although they are solicited for input as to a patent's potential interest and value). Again, its mission is to take patents off of the market – away from potential patent troll buyers – and license them to its then-current members. Down the line, the encumbered patents may be sold – even at a loss. RPX does not litigate its patents.

Open Invention Network. Perhaps, the most unique defensive patent aggregator is the Open Invention Network. The Network is a club of companies that have established a patent-sharing plan to help protect the Linux (open source) software ecosystem from hostile patent infringement litigation. The Open Invention Network was launched in 2005 as a collective effort by IBM, Sony, Philips, Novell, Red Hat, and other major Linux stakeholders in the technology industry. The founding members contributed a collection of extremely broad patents that cover a wide range of technologies. Any company can receive royalty-free licenses for those patents by promising not to not assert its own patents against any technology supporting the Linux software ecosystem used by the other members. Unlike the Allied Security Trust and the RPX Corporation, the Open Invention Network can also wield its patent portfolio for defensive purposes on behalf of its members and will use it to retaliate against litigation that is brought against Linux software by other companies.

The Open Invention Network may get its first test in wielding its patents defensively in the suit recently brought by Microsoft against new member TomTom. In March 2009, Microsoft filed a patent infringement lawsuit against TomTom, alleging that several of the company's handheld navigation products – including a few that are built on the open source Linux operating system – infringe an assortment of Microsoft's patents. Microsoft's infringement claims have raised concerns within the Linux community, although Microsoft has publicly stated that its lawsuit against TomTom is not the beginning of a systematic attack on Linux.

The model for defensive patent aggregators is clearly evolving. It remains to be seen whether they run into legal issues themselves – such as antitrust issues or other issues regarding who can, and how to, become a 'Member of the Club.'

In Memoriam: Michael J. Jackson, Inventor

2009-06-27T12:26:00.001-07:00

As we all know, Michael Jackson, singer, dancer and entertainer extraordinaire, passed away last week. He revolutionized music, dancing and the way music and dance are perceived through visual and audible means. For example, he revolutionized the music video with MTV, and made looking at a stand-alone dance "story" a form of entertainment in and of itself. What we also know is that he revolutionized dance itself – bringing new steps and moves to the world – from the moon-walk to precision disciplined movements that seemed to defy gravity. In this sense, he was an inventor.

But, he also was a true inventor in the patent sense. In 1993, the United States Patent and Trademark Office granted Michael Jackson a patent: US Patent No. 5,255,452. The patent covered shoes he designed, as well as an "anchor" in the stage floor that, when engaged, allowed the wearer to lean forward beyond his center of gravity and to achieve the 45-degree angle required by the dance choreography. We all remember the video "Smooth Criminal."

Drawing from US Patent No. 5,255,452

Still Photo from Smooth Criminal

Interestingly, Michael Jackson heralded the beginning of an innovative generation of the 1980's where previously thought limits were regularly broken – from the creation of the personal computer with Apple, to the creation of Microsoft. Not only was he ready to take on the world to become the King of Pop, but the world was also ready to receive him and allow him to take his place as one of the most creative, dynamic and innovative entertainers of our time. He was in the right place at the right time.

New Museum in Athens Designed in part to “Guilt” Britain into returning the Elgin Marbles

2009-06-19T17:22:00.001-07:00

Tomorrow, Saturday, June 20, 2009, a state-of-the- art museum in Athens, Greece will open its doors to the public. The museum, custom built to showcase the Parthenon sculptures, holds about 350 artifacts and sculptures formerly been held in a small museum on top of the Acropolis.

Antique ceramics and sculptures are displayed on the first floor while the Caryatids - columns sculpted as females holding up the roof of a porch on the southern side of the Erechtheum temple - dominate the top of a glass ramp leading up the second floor. Sculptures from the Temple of Athena and the Propylaea entrance to the Acropolis are displayed on the second floor, while the third features a reconstruction of the Parthenon Marbles, some of which are known as the "Elgin Marbles."

The Elgin Marbles currently reside in London in the British Museum. They formed part of the Parthenon frieze in Athens and were sculpted between 443 and 438 BC. Lord Elgin removed the classic Greek statues in 1816 with the permission of the Ottoman empire who controlled Athens at the time. Without Lord Elgin's actions, these archetypal statues would most likely have been lost to the ravages of war, air pollution and acid rain, along with the rest of the 94% of the Parthenon frieze.

For years, the Greeks have asked for the return of the marbles, and for years, the British Museum has responded with claims that Greece in unable to give them a suitable home. The basis for the denial has varied over the years, from the lack of security in Greece available to protect the marbles to the unfriendly air quality that could "eat" away at the marbles' integrity. And yet, now that this state-of-the-art facility is ready and waiting, seemingly allaying those justifiable fears, it still seems unlikely that the marbles will be returned anytime soon. The British Museum remains disinclined to return the marbles, citing the benefits of having the marbles in two locations: the two locations give the opportunity for more people to view the exquisite sculptures and also puts them in different educational contexts – one in its historical home, one in one of the most extensive and outstanding global museums. Further, the museum may fear setting a precedent — encouraging other nations to lobby for the return cultural heritage pieces originating in their nations, including Italy, Egypt, Iran and Iraq.

Thus, the saga continues as to who should own the Elgin Marbles – the nation who preserved the cultural heritage pieces, or the nation of origination. The principle of cultural property – property that a nation believes it should own due to the significant cultural legacy the object represents – versus personal property – property personally owned and preserved by an individual. Further, from a moral perspective, what rights should the preserver of works retain? Without the preserver, many works would be lost to the world forever.

The opening of the museum creates more emotional weight for the return of the marbles, rather than a legal basis. So, while the legal debate rages on as to who should own cultural heritage pieces, even without the Elgin Marbles, this new museum serves as an important display of the aesthetic and architectural excellence of ancient and modern Athens.

Open Source Code – Convenient, but you could lose your Rights to Enforce your IP

2009-05-17T17:40:00.001-07:00

There are a lot of legal issues associated with using open source in a software application. Open source code users usually are required to release added or altered code to the public and give a free license to others to use it without many restrictions. Such licenses can require licensees to disclose source code and distribute derivative works royalty-free. Well-known open source licenses include the Creative Commons License, Apache License and Sun Community Source License. Perhaps best-known is the General Public License, now in its third version, which governs Linux, MySQL, and other major software products. It is perhaps also the most feared for its requirement that any source code compiled with any GPL-licensed source code be publicly disclosed upon distribution -- often referred to as "infection."

Many businesses have successfully and profitably incorporated open source code in to their software products, including Google, Apple and Cisco. Until recently, incorporation of open source code into for-profit products seemed to have gone unnoticed, and the requirements to release "infected" code un-enforced. That may be changing, however. Open source code organizations are getting more aggressive about going after abusers - In December, the Free Software Foundation (FSF) filed a copyright infringement lawsuit against Cisco for an injunction based upon the use of open source code in their Linksys products. Stay tuned.

As a Non-U.S. Company, Do You Want To Establish Your High-Tech Business in Silicon Valley, California?

2009-05-02T16:48:00.001-07:00

Why set up shop in Silicon Valley? High technology companies are keen to establish their U.S. presence in Silicon Valley for many reasons.

Certainly, one reason is the widely available access here to specialized resources that high-tech companies need to start and build their businesses quickly. These resources include an established, talented labor pool and established, knowledgeable vendor companies that specialize in serving high-tech startups in the areas of finance, marketing, software development, engineering and law.

Another attraction to Silicon Valley is access to other cutting edge companies in the same industry and complementary industries. Having thousands of related startups in close physical proximity creates both formal and informal opportunities for gathering useful competitive information. Additionally, being in the same locale can generate a healthy buzz of energy around the business and the engineers, as well as make available support networks for entrepreneurs. Further, this proximity can provide access the customers that are interested in sophisticated high-tech products: being a local company providing local support for the product makes a difference in attracting buyers.

However, looking solely at the costs of doing business, Silicon Valley ranks high as compared to other regions, based on labor, housing and office space costs. Nonetheless, success in the high-tech industry often has less to do with costs and more to do with getting new products in front of the right customers. Silicon Valley culture and resources frequently give companies a strategic edge in this regard.

Top Ten Surprises for Non-U.S. Companies Starting a Business in Silicon Valley:

1. Culture shock: despite its international workforce, Silicon Valley is provincial

2. High cost of housing and office space

3. High expectations of local employees for both salaries and share options

4. Marketing is very sophisticated -- and expensive

5. The US market is huge, but also very regionally divided and highly competitive: markets must be targeted well

6. More time than you think may be required to make the first sales

7. Paperwork and bureaucracy take time and patience

8. Taxes, which differ from state to state, and, often from city to city, can be surprising and substantial

9. Access to financing sources (venture capital) can be difficult to tap

10. The legal requirements vary from location to location, and can include establishing a business entity, obtaining a Federal Employer Identification Number, checking the availability of your desired business names, registration of the business locally, Fictitious Name Registration, and obtaining other permits and licenses.

Business Tips for Non-U.S. Companies Starting a Business in Silicon Valley:

o Network with colleagues in Silicon Valley within and outside of your industry

o Buy support where available (rather than doing it yourself) or hire employees to do it.

Hire local consultants to provide:

o Help finding office space, setting up the office.

o Accountants for bookkeeping, business and networking advice

o Headhunters to find top employees

o Employee Benefit consultants to set up competitive benefit packages

o Have adequate financing arranged before entering the market

o And, of course, hire a good Lawyer to set up and help run the business to help you avoid the US legal minefields

- Global General Counsel

The Exception becomes the Rule: a Covenant Not to Sue is Equated to a Patent License

2009-04-21T17:29:00.001-07:00

In a recent decision, the Federal Circuit clearly mixed up the basic underpinnings of a license to-do something verses a covenant not-to-do something. The Court in Transcore v. Electronic Transaction Consultants (Case No. 2008-1430), held products sold under a covenant not to sue were authorized sales that gave rise to patent exhaustion due to a covenant not to sue in a settlement agreement that was deemed by the court to be equivalent to a patent license.

Both the principles of a license and a covenant not to sue stem from common law real property rights. The framers of our constitution found intellectual property rights to be akin to real property rights in many ways. The theory of natural law – as you sow so you shall you reap – holds that you deserve to keep reap the benefits of your work. If you sow seeds in the land, you should own the crops produced from it; similarly, if you create intellectual property by expressing or implementing novel ideas, you deserve to reap the rewards from exploiting them.

If we carry the analogy of real property to intellectual property, an easement is something like a license to use your IP. In real property, an easement is a legal right to enter onto your property. It is not illegal or a trespass. With that easement, I the owner, have certain duties to you – to actually own the property (you can't give a right to something you don't own), to maintain your right to the easement, even if I sell the property (an easement usually travels with the title to the land), and to guard against foreseeable dangers. Contrarily, with a covenant, I do not need to own anything to promise I won't attack your rights (I can promise not to sue you for entering on someone else's land), I do not have a duty to transfer a covenant to a subsequent owner (covenants are considered personal to the individual who made it, and are usually non-transferable), and I do not need to actively guard your safety.

Similarly, in the intellectual property area, a license is a positive grant of rights to you to be able to use my property. I cannot grant you those rights, unless I have clear title to the IP (see the line of cases stating that if a patent is invalidated, there is no duty to pay license fees with respect to that patent). Further, a license is an encumbrance to the intellectual property, and usually does "travel" with the title of the IP. Lastly, I do have a duty to maintain the intellectual property viable for you to use under the license (i.e. pay maintenance fees on a patent), so that you get a benefit from your bargain.

A covenant not to sue under a patent or other intellectual property does not give you rights. For example, a covenant not to sue under a specific patent gives you freedom from worrying about a lawsuit from me, but if you practice my invention, damages will accrue during the no-lawsuit period, and I can sue you to collect when the period ends. Also, importantly, as I mentioned above, a license is considered an encumbrance that runs with title to a patent or other intellectual property – the next owner has to respect the license. A covenant, however, is personal to me – I promise not to sue you on the patent, but the next owner does not have to honor that promise. Of course, I have no duty to maintain the intellectual property free from encumbrances or even a duty to maintain its existence (by paying maintenance fees on a patent, for example).

The Federal Circuit relies on one of the explicitly enumerated rights that a patent bestows on its owner – the right to exclude others from practicing my invention. To be sure, even if I give you a license to practice my invention (a right to enter my property), you may need a license from others as well (you may have to cross other people's land to get to my property to use your easement). While it is true that a license to a patent does not give an absolute right to practice all aspects of my invention, it does give positive rights to practice those parts of my invention that are novel and mine. Smart lawyers crafting complex language can blur the lines between a covenant not to sue and a license, such that one really does become the other – and the Federal Circuit cites some of these cases where sophisticated language has blurred the lines. Nonetheless, a covenant is not always a license to a patent. In this sense, the Federal Circuit made the exception the rule, and missed the fundamental differences between a license and a covenant not to sue.

The above is solely my opinion and does not constitute legal advice.

Star-studded Litigation Panel Speaks about Dealing with the Media

2009-04-07T11:27:00.001-07:00

On Thursday, April 2, 2009, I had the great privilege and pleasure of moderating a unique, star-studded panel of the intellectual property world at the IP Counsel Café. The panel was comprised of Lanny Davis (former Special Counsel to President Clinton during the Whitewater and Monica Lewinski scandals), Adam Goldberg (former Special Associate Counsel to President Clinton during that time), Mark Chandler (long-time General Counsel of Cisco) and Mark Howitson (counsel for Facebook). The topic of the panel was "Communicating with the Media to Your Company's Advantage in Business and Litigation."

The topic was my brainchild (I am happy to say), born out of listening and admiring the work of Lanny Davis in helping companies get their message out to the public – especially in risky and stressful times of litigation. When I mentioned the topic to an in-house attorney who manages litigation, he pooh-poohed it saying that there would be nothing to talk about: "When you're in litigation, the only response to the media is 'No Comment.'" Then, I knew the panel would be great.

Lanny Davis led the discussion with a luncheon address with war stories about defending President Clinton in scandals, including the allegations that the President had invited donors to stay in the White House's Lincoln bedroom in exchange for hefty donations to the then-upcoming presidential campaign. The evidence was damning. Rather than hiding it and being forced into a reactionary defense, Lanny 'took the bull by the horns,' and got all the information out immediately… on the eve of the 4^th of July. He then set about educating the media that what President Clinton might have done was not so unusual – other presidents invited donors to the White House in exchange for donations, including President Reagan – and he had proof. (More in his book). Long story short, instead of turning into an impeachment trial, the scandal faded away.

The lesson was clear – if you stay quiet, you let the other side gain an advantage and get their story out. During the panel session, Mark Chandler agreed. He clearly advocated engaging the press, as long as your team had done its homework, knows the facts and is very prepared to respond to questions. Of key agreement amongst the panelists was the need to communicate the facts clearly to the media – "on the record" or "off" – especially in complex cases where the facts can easily get lost in the legal-ese. Other topics of the hour and a half session included how to deal with a "shadow trial" in blogs and other quasi-news outlets, how to deal with conflicts in litigation strategy and media strategy (when media strategy can control litigation strategy), and how not to risk waiver of the attorney-client privilege when in-house counsel speaks to the media.

The positive feedback on the session was tremendous: one high-profile in-house patent attorney in the audience told me afterwards that this session was the high point of the entire two-day conference.

Art World Madoff-Character Arrested

2009-03-28T17:40:00.001-07:00

A corner stone of the New York art scene who sponsored museum caliber exhibitions was recently arrested and indicted for allegedly architecting and implementing an art-world ponzi scheme.

This art gallery dealer seems to have found a more lucrative form of art thievery than merely swiping a painting one at a time. He seems to have found a way to make multiple times the value of artworks by selling investments in paintings he did not own, and selling a painting several times to multiple buyers. Lawrence B. Salander was the owner of a now-closed Manhattan art gallery with a star-studded clientele, including tennis champion John McEnroe. He allegedly stole $88 million from them by selling part-interests in paintings where the part-interests were greater than the entire interest.

Criminal prosecutors state that in McEnroe's case, Salander sold to him a half-interest in an Arshile Gorky painting and told McEnroe that they would split profits when the painting was sold to someone else. McEnroe later learned the painting was hanging on someone else's wall, but Salander had not reported the sale or any profits to him, say prosecutors. When McEnroe confronted Salander, the gallery owner gave him a half-interest in another Gorky painting. McEnroe lost his ownership interest in that second painting after he loaned it to Christies auction house for an exhibit, and the auction house refused to return it. Allegedly, Christie officials told him another third party had claimed ownership of the painting and put a lien on it.

The New York District Attorney announced Thursday that a 100-count indictment names Salander and his Salander-O'Reilly Galleries LLC on charges that include grand larceny, securities fraud and forgery. Salander faces up to 25 years in prison if convicted of first-degree grand larceny.

Author Ulrich Boser in The Garner Heist says: "Then, late one afternoon, sitting in my chair, gazing up at the portrait, it dawned on me that owning a artwork had its own potent power – it made me feel as if I controlled some portion of its skilled creativity, that there was a direct connection between me and the art… it was that emotion, that passion to possess a work of art that made art cons so successful."

Salander seems to have found a way to exploit his clients' emotion for art and desire to possess it, while lining his own pockets and living the Life-of-Reilly (pun-intended).

Principles for Successful Entrepreneurs

2009-03-22T14:38:00.001-07:00

I spoke at a fabulous event this weekend – Enterpreneur Trek at Stanford – designed to give entrepreneurs a 2-day intensive reality-check on their business models and plans. I listened to the speaker before me in the late afternoon: extremely talented, successful, mid'50s gentleman-engineer who knew the technology of his biofuel invention backwards and forwards. He rattled on energetically for an hour and a half – clearly he was devoted to his invention and business. Meanwhile, the fellow in the audience in front of me who was on Paris-time literally nodded off in an uncomfortable, embarrassed snooze.

Yet, what was surprising to me was who was engaged and awake. While some snoozed and three bored ladies from Asia got up and left – yeah, I noticed – most of the guys were engaged, thinking, and asking intelligent questions all the way to the end of the long session.

I got the 5 o'clock spot – everyone in the audience by that time is tired and ready for a glass of wine after a full day of speeches that pushed their thinking from 8:30 am straight on… and now they get to listen to a lawyer. Grrreat.

My co-speaker and I had never met, and did not speak before the session began. I began with a fact-filled presentation about protecting your IP as a start-up. In twenty minutes, I scooted through essential principles of employee and founder assignment agreements, basic patent principles and confidentiality agreements to help a start-up keep ownership of their IP. My counterpart was supposed to speak about VC funding for start-ups. (The speech he actually gave was a pitch for his big law firm.)

I think what was equally surprising to me was the dearth of ladies in the audience. I told you the Asian trio left in the middle of the tech-talk. During my talk, the audience left was about one quarter ladies. While I spoke, I watched – there was a brightness in their eyes – not just because of the brilliance of my words J, but I think (I hope) because I was a smart woman who showed she is at least as smart if not smarter than my co-speaker – and I had made-it. They were happy to see a female mentor. But, not one of them asked a question, not one of them made a comment. Their male counterparts did.

Yet, I can only tell you, dear Reader, it is tougher to achieve professional success than I ever believed it would be. I started engineering school at Cornell – we were 51% women in my class – the School was so very proud. 4 years later, we graduated less than 20% women. I am honored to have been amongst them. In defense of the ladies I saw this weekend, I was not outspoken until later in life. I listened, I thought, I learned. I've watched talented women move up, take themselves out of the workforce to get married, and, while they tried, never made it back. I also saw a few, few women – luckily for me, my mentors – stick with it, and make it. I've tried to follow in their footsteps. Now, I set the path for my younger sisters. I suppose this weekend I was sad that young women still feel intimidated and weak, as I did when I was in their shoes.

I know intellectually that mental fear breeds lack of mental stamina, drive, courage and confidence. Me? I've lacked all on occasion, but I know I am at least as smart if not smarter than the guys I meet (well, most of them).

My secret for success?

Be smarter than any one else (that's easy – just read and study more)
Be confident (I never noticed until later that I was the only girl in engineering class, when grilled with a question by the prof)
Be humble - Accept advice (Listen to your friends, mentors, spiritual sisters and brothers – they mean well and are trying to tell you something)
Be ethical (Golly, this shouldn't be an issue, but don't take the short-cut – there is no shortcut!)
Be tenacious (Yeah, you get tired, but stay for that last lecture, go to that last networking event)

Art Law: Cultural Property versus Personal Property

2009-03-04T16:29:00.001-08:00

Recenlty, Cai Mingchao bid over $40 Million for two bronze rat and rabbit sculptures that were being auctioned off from the personal art collection of the late Yves Saint Laurent. He then refused to pay Christie's auction house saying they were "looted" from China and should be returned to the Chinese government free of charge.

The two sculptures were part of an elaborate 18th century fountain constructed by European Jesuit priests at the Summer Palace outside Beijing. Each of the 12 animals of the Chinese zodiac was represented, spouting water in turn during the two-hour period of the day for which it was supposed to be responsible in Chinese astrology. The Summer Palace was burned and looted by British and French soldiers at the end of the Second Opium War in 1860 in retaliation for the execution of their emissaries by the Chinese court, and all twelve heads disappeared.

Five other sculptures from the fountain have come up for auction in recent years and were bought and returned to China by Chinese millionaire philanthropists. The remaining five are missing.

Cai Mingchao wanted to make a statement that the statues should be returned to China as part of China's cultural heritage. On the other hand, without the preservation by caring collectors, even these two precious art objects would not exist.

A classic example of the clash between cultural and personal property rests in the Elgin Marbles which currently reside in the British Museum in London. The Elgin Marbles formed part of the Parthenon frieze in Athens and were sculpted between 443 and 438 BC. I became enchanted with the friezes as a college student at Cornell U: the Temple of Zeus there was an eccentric coffee shop/oasis where one of the very few full-sized plaster casts of the Elgin marbles is displayed. Lord Elgin removed the classic Greek statues in 1816 with the permission of the Ottoman empire who controlled Athens at the time. Without Lord Elgin's actions, these archetypal statues would most likely have been lost to the ravages of war, air pollution and acid rain, along with the rest of the 94% of the Parthenon frieze.

This is a clear clash of the principle of cultural property – property that a nation believes it should own due to the significant cultural legacy the object represents – versus personal property – property personally owned and preserved by an individual. Further, from a moral perspective, what rights should the preserver of works retain? Without the preserver, many works would be lost to the world forever.

So, the debate continues – from grand Greek statues residing at the British Museum to bronze fountain sculptures being auctioned off from the personal art collection of Yves Saint Laurent.

Art Law: Crook with Good Taste

2009-03-02T16:01:00.001-08:00

Having a more-than-passing interest in art law, and thinking that my last post was a bit "heavy" if not scintillating, I thought I'd post this quick note about a "crook with good taste."

In 1999, Joseph Michael Killebrew purportedly stopped payment on checks after buying original oil paintings valued over $261,000 from Laguna Beach galleries in his then-neighborhood. He also purportedly filed a false police report for theft from his Laguna Beach home of his personal art collection for which he collected over $260,000 from his insurer. Today, the art is thought to be valued at at least double – or over $525,000. He was arrested in Las Vegas this week, where he was living under a false name.

As thieves grow more bold taking art from galleries, museums and homes, it is nice to see that the wheels of justice do turn (if slowly) and that at least this art theft was solved.

Reducing Trade Secret Theft by Former Employees

2009-02-24T15:38:00.001-08:00

In the midst of this recession fraught with layoffs, companies can take positive action to reduce trade secret theft by their former employees. In a dark economy, trade secret theft tends to increase (see Ponemon Institute Report). Trade secret theft by former employees may be driven by (a) potential employees wanting to look more attractive to potential employers; and (b) disgruntled employees who want to see their former employer hurt. Along with the usual steps to protect their trade secrets, companies can create a positive post-employee environment that instills responsibility and pride in former employees to mitigate those negative driving forces.

Basic trade secret law requires that to be protectable, the secret derives economic value from not being known and is the subject of efforts to maintain secrecy. Trade Secrets can be customer lists, details about employees, technical information about a product, methods for doing business, manufacturing methods, and a host of other information that comprises the "secret sauce" for a business' success.

A company may wish to stop an employee from working for a competitor or to reduce the possibility of trade secret theft – but, under California law, they can't. In tension with companies' needs to protect their trade secret 'crown jewels,' in California, we have a strong policy and legal structure that supports the free mobility of employees. In Silicon Valley, this principle is especially strong where employees are notorious for their mobility – often viewed as job-hoppers in other parts of the country – and where a lot of competitors are located in a very small geography.

Covenants not to compete are largely illegal in California – thus allowing a former employee to work directly for a competitor. In fact, a proponent of covenant not to compete can be held liable for tort of unfair competition. Additionally, as California public policy, it is likely that the principles of free employee mobility may even be applied to employees outside of California who are employed by a California corporation. A company cannot end-run this principle with penalties: if a company does not restrain a former employee from working for a competitor, but when the employee does, the company imposes forfeiture of stock or some other financial or benefit penalty – this is illegal.

So, what are the categories of cases when you think a competitor is getting your trade secrets from your former employees?

There are 2 main categories of cases: the smoking gun and gee-how'd-they-do-that? cases.

The smoking gun cases are the easy ones – these are the cases that get litigated, and the company almost always wins: the company has the video tape of employee walking out of the building with a box filled with prototypes or company computer equipment; or, a friend of a former employee "rats" about seeing shelves full of computer equipment belonging to the company in employee's private storage unit. These cases are easy to litigate, because the evidence is handed to the company on a silver platter. With that evidence, it is relatively easy to get a court order to seek more evidence of theft that may still be in the former employee's possession.

The harder ones are the gee-how'd-they-do-that? cases. These are cases where it is highly likely that the competitor gained your company's trade secret information improperly but you can't prove it – it just 'smells' bad. These cases rarely get litigated, because it is almost impossible to get hard evidence of theft: the competitor comes out with a feature similar to your company's in record time; the competitor starts coming out with several patents that are in your space, where they'd had none before; a stream of employees leave your company for the competitor over a year or so – this employee-drift may indicate the use of knowledge about company personnel (who is loose-in-the-saddle; work schedule preferences/needs (kids, commute, etc); strengths and weaknesses in competency; salaries). These cases are hard to litigate, because getting real evidence is almost impossible. In order to get a court order to get access to a former employee's home computer, home files or personal gmail or yahoo email account, there must be more than just a 'bad smell.'

So, what do you do to protect your company's trade secrets?

Well, there is the usual stuff:

During employment: hold an annual "employee awareness program" about what trade secrets are, why they are important to the company, and what the penalties for improper disclosure are. These can be in the form of a meeting, written reminders or a memo from the CEO to all employees. Also, make sure all employees sign a non-disclosure agreement and an invention assignment agreement. Your company may want to perform an audit to make sure all employees have actually turned in the paperwork, and that the agreements themselves are complete and current with the law. Hold employee training sessions to help employees understand what confidential information actually is, and what they are supposed to do to restrict its use and disclosure.

Upon termination of employment: make sure that the employee is given an oral and written reminder of his or her obligations during the exit interview; request that the employee give a written reaffirmation of his or her confidentiality obligations; provide duplicate copies of the non-disclosure agreement and inventions agreement that the person signed at the beginning of his or her employment. Also, make sure the employee returns all company property and provides written confirmation that s/he as actually returned it all: engineering notebooks, marketing/business plans, financial information, customer and vendor lists, company personnel information. Lastly, be sure to preserve integrity of the former employee's computer information – mirror the hard drive, and if possible preserve the hard drive itself - back-up all emails and preserve back-up tapes.

If the suspicion of trade secret theft by a competitor becomes more intense, consider escalating the communication by sending a letter to the former employee's new employer, notifying the new employer of the former employee's post-employment obligations, and providing a copy of the non-disclosure agreement signed by the former employee with the company.

Environmental Support: Because the source of trade secret theft is often a disgruntled former employee, creating an environment that instills responsibility and pride in former employees is important. If a former employee has good feelings and a sense of accomplishment from her or his former company, s/he is less likely to want to see it hurt by a competitor. Also, creating a network of current and former employees creates a community where an individual is known and can be held accountable. The community can impose shame or ostracize a renegade former employee who denigrates the achievements of his or her colleagues, or (more directly) hurts the stock price of current stock holders in that community.

Creating a positive environment for former employees is in its self-interest, yet it is often antithetical to a company's instincts. Companies often want to cut off all ties with and renounce completely a former employee. In turn, the former employee may feel abandoned, rejected and depressed -- leading to disgruntlement. In the end, a company's myopic consciousness can only hurt it. A company must be practical and growth-oriented looking in its actions. Creating a positive environment for former employees costs little, and may, indeed, lead to positive outcomes for the company: former employees who have experienced a positive post-employment environment may be more inclined to create new business opportunities for the company when they move to positions in other companies; they may be more helpful to the company if their testimony is needed down-the-line in litigation (especially for engineers in patent or other technology disputes); and of course – importantly for this article – former employees may be less inclined to leak information to competitors that may be harmful to the company out of a sense of pride.

So how do you create an environment where former employees are not pariah?

The company can provide post-employment support in the form of structured networking groups and meetings between former employees. Companies are often loathe to provide references for former employees (and there are good legal reasons for this), but it might want to soften its policy for employees who wish to do this for former employees. The company can provide job seeking resources for RIFed employees, including introductions to recruiters, and a job board with exclusive listings for "alumni". Another great resource is LinkedIn. Many companies have alumni groups that allow networking between former employees, to not only help them find new opportunities, but also to create that sense of community and connected-ness to others.

For more information, contact us through www.globalgeneralcounsel.com .

Can a Professional Service Provider in California form an LLC? And, Who’s a “Professional Service Provider,” anyway?

2009-01-28T16:32:00.001-08:00

I've received a bunch of requests as to whether a service provider in California should form a Limited Liability Corporation (LLC). An LLC is a business structure that is similar to a corporation, but requires fewer formalities. Also, an LLC can help protect individual owners from being personally liable for business debts.

But is an LLC really appropriate for your business? My first question is: what are the services being provided?

Under California law, providers of "professional services" cannot legally form an LLC. Corporations Code §17375. "Professional services" means "any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act" and the Yacht and Ship Brokers Act. Corporations Code §§13401, 13401.3.

But who really are "professional" service providers? Some providers of services have been clearly deemed to be "professional": Lawyers, engineers, accounts, architects, real estate brokers, doctors, dentists, chiropractors, speech pathologists, audiologists, physical therapists, nurses, psychologists, optometrists, pharmacists, veterinarians, marriage and family counselors, clinical social workers and shorthand reporters. They cannot form an LLC to provide services. Businesses in the banking, trust, and insurance industry, are also typically prohibited from forming LLCs.

But what about the other occupational activities require licensing under the Business and Professions Code, including barbers, locksmiths, private detectives, alarm companies, pest control companies and automotive repair dealers?

The California Attorney General issued an opinion in 2004 that provides some guidance. A "profession" requires specialized knowledge and often long and intensive academic preparation. A "profession" is an occupation requiring a high level of training and proficiency. To determine whether a particular service is "professional" or not requires an examination of the educational, training and testing prerequisites. "We conclude that a business that provides services requiring a license, certification, or registration pursuant to the Business and Professions Code may conduct its activities as an LLC if the services rendered require only a nonprofessional, occupational license." California Attorney General Bill Lockyer's opinion, No. 04-103.

It seems that providers of such other occupational activities may be able to form an LLC, but the California Secretary of State still may decline to register it. Contractors, for example, are still routinely declined by the secretary of state when they request formation of an LLC.

To learn more about limited liability companies and whether an LLC is the right structure for your company, visit the Limited Liability Company
area of Nolo's website.

New Patent Laws may Affect your Pending Business Method and Software Applications

2009-01-02T12:45:00.001-08:00

The most recent in the raft of new cases redefining patent law in the United States may directly affect your business method and software applications. You may want to start the new year by double-checking your patent claims are drafted properly in light of the new laws coming down.

There is a case that just came down from the Federal Circuit – the most authoritative court in the US (next to the Supreme Court) - which may be of concern to claims drafted in the style: A method of doing or achieving X result, comprising steps A, B and C. The case is called: In re Bilski, Case No. 07-1130 (Fed. Cir., Oct. 30, 2008).

Recently, the USPTO rejected a patent application that was a "system" based upon this case: Ex parte Koo, No. 2008-1344 (BPAI Nov. 26, 2008). In Koo, appellants sought to patent a "method for optimizing a query in a relational database management system." The PTO board of appeals affirmed the examiner's rejection based on obviousness, but also rejected it on a new ground of rejection under 35 U.S.C. § 101, i.e., that the claimed invention was non-patentable subject matter.

The idea is that that you cannot patent a pure idea (namely a system or a method), without the system transforming or being tied to a physical thing/machine or tangible result.

You may want to prod your counsel about these new rules, and take any steps needed before any final rejection is made on this or your other applications.

Welcome

2008-12-22T16:58:00.001-08:00

This is the first post introducing Global General Counsel. See my website at www.globalgeneralcounsel.com.