Intellectual property in the Russian Federation

The Russian legal system is a civil legal system.  That means that unlike common law legal systems (United States) there is no judge made law.  The Russian Federation makes all the laws and they are administered by different federal agencies.  The Russian law that deals with Intellectual Property is the Civil Code of the Russian Federation Part IV section VII.  The agency that handles Intellectual Property in Russia is the Rospatent.  Part IV section VII covers sixteen kinds of Intellectual Property:

1. Works of science, literature, and art;
2. Computer Programs;
3. Databases;
4. Performances
5. Phonograms;
6. Broadcasting or diffusion of radio or television transmissions via cable;
7. Inventions;
8. Utility Models;
9. Industrial Designs;
10. Selection attainments;
11. Topographies of integrated circuits;
12. Secrets of production (trade secrets);
13. Trade names;
14. Trademarks and Service marks;
15. Appellations of origin;
16. Commercial names.

These categories are the unofficial translation of the Russian form of Part IV section VII.  So some of the words have no American equivalent because we don't protect the category, and some have no English equivalent because the word just doesn't translate.  For example, trade names, appellations of origin, and commercial names all fall under Trademark Law in America; Whereas Selection attainments cover what we might call plant patents in America, but the selection attainments' scope is much broader, so this is a term whose meaning was lost in translation.

I think it's interesting to note the difference from the American system where we protect source of origin markers (trademarks); new, useful, and non-obvious machines, processes, and articles of manufacture (patents); original works of authorship (copyrights); and secrets that are valuable because of their secrecy (trade secrets).  The Russian system has more distinctions, but it's hard to tell what those distinctions mean without a look into the applications of those distinctions.  I will do this in my next post about Secrets of production in the Russian Federation.

NAFTA sec. 1711 trade secrets in North America

The North American Fair Trade Agreement is a treaty signed between Mexico, Canada, and America.  In section 1711 of NAFTA the countries reached an agreement about trade secrets.  The agreement goes like this:

• All member countries must provide legal means to prevent trade secrets from being disclosed, acquired, or used by someone other than the trade secret owner in a manner contrary to honest commercial practice, without the consent of the owner.
• All member countries agree that a trade secret is: 
• information that is secret;
• has actual or potential economic value;
• and the owner of the information has taken reasonable measures to assure the information's secrecy.
• All member countries can't limit the time a trade secret is protected for.
• All member countries can't make it unnecessarily difficult to license trade secrets, either by fees or procedures.
• All member countries agree that if their drug approval system requires disclosure of potential trade secrets that those trade secrets will be protected from disclosure by the member country. 

Importing trademarked goods and the gray market

Sometimes trademark owners sell their wares in other countries.  So, you might think that if you can go to the other country and get trademarked goods for cheap that it makes sense to have it imported back to the U.S. and to sell it for less than what it sells for in the U.S.  Unfortunately the Tariff Act of 1930 prohibits this sort of business.  Title 19 U.S.C. sec. 1526 is the section that outlaws this behavior and it says that it is unlawful to import into the U.S. any merchandise made in another country if it bears a trademark owned by a person or business that was created or organized in the U.S.; the trademark is registered by a person domiciled in the U.S.; and the registration is filed with the secretary of the treasury; unless you have the written consent of the owner of the trademark.  These goods are called gray market goods because in the country they were in, they were authorized goods with a valid non-counterfeit trademark on them.  However, when those goods are imported they become illegal.  If you get caught importing gray market goods then:

• first time, you get a fine for less than the value of the goods' American suggested retail price;
• any time after that, you get a fine for less than two times the value of the American suggested retail price;

The fine is at the discretion of the U.S. Customs services and it is in addition to any other criminal or civil penalty.  Also they seize your goods and you don't get them back.  Lastly they can shut your business down and stop you from selling these imported gray market goods. 

Beltronics USA, Inc v Midwest Inventory Distribution, LLC, 562 F3d 1067, 1069 (CA 10 2009)

This is a business story about authorized dealers of radar detectors that stripped the serial numbers off the detectors so that they could sell the detectors through back channels. The distributors were sued, and lost, for trademark infringement.

Beltronics made radar detectors and sold them to two authorized distributors.  Beltronics' distribution agreement said that those two distributors were the only ones who could distribute the product.  The two distributors stripped the serial numbers off the radar detectors and then sold them to other distributors.  The authorized distributors stripped the serial number off because they didn't want Beltronics to know that it was the authorized distributors who were selling the radar detectors to other distributors.  Beltronics found out and sued for trademark infringement.  The authorized dealers defended by saying that Beltronics lost its rights when it sold the detectors to the authorized distributors, this defense is called the first sale doctrine.  The court held that the first sale doctrine does not apply when the alleged infringer sells goods that are materially different than the goods sold by the trademark owner.  The court found that stripping serial numbers off detectors makes the detectors materially different.  The authorized distributors lost the trademark infringement suit.

So, if you're going to breach a distribution agreement with your supplier don't do it in a way that materially changes the goods that the supplier supplied you with;  Or, you can do whatever you want and just budget for a trademark infringement lawsuit.

15 U.S.C. sec. 1125(a)(1)

This statute has been used to protect trademarks.  It makes a civil cause of action for anybody who is likely to be damaged when:

• A person, business, or government entity;
• Uses a word, symbol, or device
• or uses lies to misrepresent where a good or service comes from or to describe goods or services;
• The use is made in connection with a good or service;
• The use is made in commerce;
• And that use is likely to cause confusion, mistake, or deceit as to connection to another person or another place of origin;
• or when the use is an advertisement that misrepresents the nature, characteristics, qualities, or geographic origin of the goods or services;

Note: When the person who is likely to be harmed wants to sue to protect their alleged trade dress, that person must first prove that their alleged trade dress is not functional.

15 U.S.C. sec. 1114 limitations on remedies for trademark infringement

People, the government, and corporations can be sued for money or enjoined (told to stop) when, without permission, they use someone else's trademark in business in a way that is likely to cause consumer confusion, consumer mistake, or deceive consumers.  The person using the trademark without permission is an infringer and the person who owns the mark is an owner.  The statutory limitations on who can be sued, and what they can be sued for, are covered in section 114 of title 15 of the U.S.C., they are:

• The infringer must knowingly use the other person's trademark for the owner to recover money.
• When the infringer is only printing the mark and they show that they are an "innocent infringer", the owner can only sue to stop the infringer from printing the mark in the future.
• There is no injunction for periodicals (newspapers, magazines, ezine) where stopping the printing would delay printing of the whole periodical.  This only applies to periodicals that have adopted an industry wide practice for printing and not some strange scheme they devised to allow them to take advantage of this limitation.
• A domain name registrar can only be sued to stop their business of registering domain names when: 
• they have not quickly given the court enough information for the court to establish that it has jurisdiction over the case; 
• changed the domain name registration during the case without the court's authorization;
• or willfully failed to do something the court told the registrar to do.
• A domain name registrar that does something in compliance with a court order or as part of a reasonable policy to prevent trademark infringement, can not be sued unless they do something from the list of things mentioned in the previous bullet point.
• A domain name registrar can only be sued for registering or maintaining a domain name if there was a bad faith intent to profit from the registration or maintenance of the domain name.
• If a domain name registrar is sued because of what they did to someone's domain name based on a material misrepresentation from another person that the domain name was infringing a trademark, then the person who made the material misrepresentation pays for any amount the registrar is sued for and the registrar's costs of defending the suit. 
• If a domain name owner's domain name is suspended, disabled, or transferred because of the domain name registrar's reasonable policy to avoid trademark infringement; then the domain name owner can sue to have the domain name reactivated or transfered back to them.
• Manufacturers or licensees/licensors of technology that makes part of a video imperceptible are not liable for trademark infringement as long as they make sure that the technology "provides a clear and conspicuous notice at the beginning of each performance" that says that the video is altered from the performance intended by the director or copyright holder of the video.
• The requirement that the technology provide clear and conspicuous notice of the alteration only applies to technology manufactured after October 24, 2005.
• This is just a safe harbor provision.  If the manufacturer doesn't comply with it, it doesn't mean that manufacturer is guilty of trademark infringement.  The manufacturer just can't use this clause as a defense.
• If a member of a private household makes a part of a video (that was authorized to be performed in, or transmitted, to their house) imperceptible so that they can view it later in their private home; then there is no trademark infringement.  As long as their is no fixed copy of the altered version of the video.
• If a person makes software that does what is described in the previous bullet, and the software is designed to be used at the direction of a member of a private household, then there is no trademark infringement.

In Re California Innovations, Inc., Fed.Cir. opinion 02-1407

California Innovations was a Canadian company who applied for a trademark for their name and were turned down by the USPTO.  The court cited 15 U.S.C. 2(e)(3) of the Lanham Act and claimed that the name was primarily geographically deceptively misdescriptive.  Before the North American Free Trade Agreement, the PTO put primarily geographically descriptive or deceptively misdescriptive marks on the supplemental register until there was a showing of acquired distinctiveness, then they could go on the principal register.  After NAFTA a new standard for marks was in play, "if the place [in the mark] is noted for the particular goods, a mark for such goods which do not originate there is likely to be deceptive and not registrable under any circumstances."  Loew's Theatres, 769 F.2d at 768, n.6.  Also in House of Windsor, 221 USPQ at 57, the instant court cited this sentence, "if there is evidence that goods like applicant's or goods related to applicant's are a principal product of the geographical area named by the mark, then the deception will most likely be found material and the mark, therefore, deceptive."  From these cases the court derived two elements of a primarily geographically deceptively misdescriptive mark: 1)mark names a geographic location that is known for producing the goods that registrant seeks to trademark 2)the good-place connection made by the mark would materially influence the consumer.  In the end the court adopted a three-prong test, the two prongs already mentioned, and the third prong of "whether the mark is recognizable, at least to some large segment of the public, as the name of a geographical area."  In Re California Innovations, Inc., Fed.Cir. opinion 02-1407 at p.5.  The court then remanded the case and told the USPTO to look at these new post-NAFTA factors. 

General Motors Corp. v. Ignacio lopez de arriortua, 948 F. Supp. 670 (1996)

GM sued: VW of America; the "Lopez Group" including Jose Ignacio Lopez, Jose Manuel Gutierrez, Jorge Alvarez, Rosario Piazza, Hugo Van der Auwera, Francisco Garcia-Sanz, Andries Versteeg, and Willem Admiraal; VW Group including Ferdinand Piech, Jens Neumann, Jaero Wicker, and H.W. Lytle. GM sued because they alleged that the defendants stole trade secrets and conspired against GM.  GM alleged that at least as early as August 1992 and until March 1993, while Lopez was still working for GM, Lopez talked with VW and agreed to come work for VW and take confidential GM information with him to his new job at VW.  March 1993, the Lopez Group all left GM to go work for VW.  The Lopez Group brought 20 boxes of documents with them to VW, spent a month copying the documents, and then destroyed the documents; all while working for VW.

In June of 93' German police found Opel, a subsidiary of GM at the time, documents at the houses of various Lopez Group members and at VW.  Alvarez sent a letter to Gutierrez soon after saying that they needed to come up with an explanation for having the documents.  At later press conferences the members of the Lopez Group denied taking any documents and Piech publicly claimed that the documents seized from Alvarez's home were planted by Opel.  VW hired an outside firm to investigate the activities of the Lopez Group; the firm found that GM documents were brought to VW, copied, and shredded.  On March 7, 1996 GM filed the instant case and alleged: RICO violations of wire fraud, interstate and foreign travel to aid racketeering, tampering with witnesses, and transportation and receipt of stolen goods; conspiracy to violate RICO; trademark and copyright violations; fraud; breach of fiduciary duty; conversion; misappropriation of trade secrets; conspiracy and unjust enrichment.

Defendants attempted to dismiss the RICO charges.  The RICO statute in question says, "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."  18 U.S.C. sec. 1962(c)  Racketeering activity is any act or threat involving specified state crimes, specified federal statutes, and specified federal crimes. 18 U.S.C. sec. 1961(1).  Defendants moved to dismiss because they claimed that there was no "pattern" of racketeering.  The supreme court held that a common sense approach to RICO's "pattern" requirement be used, and reasoned that "pattern" means a relationship between the predicate acts together with the threat of continuing activity.  H.J., Inc. v. Northwestern Bell Telephone co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195(1989).  The court in the instant case went on to hold that covering up the predicate acts is itself a continuation of the scheme, and satisfies the "pattern" requirement.  From these holdings, the court was able to hold that GM's predicate acts alleged, if proven, would satisfy the "pattern" element of the RICO statute.  The court said that the actual acts of theft coupled with the continuing effort to obstruct justice was evidence enough of a "pattern of racketeering."

Defendants also attempted to claim that GM never proved the "enterprise" element, as required by the statute.  The court decided that even if the "enterprise" element had to be plead with specificity, as opposed to notice, GM had adequately plead the element.  The court held that participation of a corporation in a racketeering scheme, by itself, is enough to show that there was the necessary organization to satisfy the "enterprise" element.  The court reasoned that by GM alleging that VW provided the facilities for the copying and shredding of purloined papers, GM had plead with specificity enough to prove that there was an "enterprise".

The court held that because violations of RICO were sufficiently plead, intentions to violate RICO were sufficiently plead, so the court denied a motion to dismiss the conspiracy charge.  In response to Defendants assertion that GM was only harmed indirectly, the court held that a theft of a trade secret is a direct injury, and outlined how the damages could be calculated.  The defendants tried to argue that because the injury would be felt in Western Europe, that this complaint was complaining of extraterritorial causes and effects, which U.S. courts do not have jurisdiction to hear.  The court reasoned that because the predicate acts were part of a larger scheme, that enough predicate acts happened within the U.S. to make the whole scheme and its effects under U.S. jurisdiction.  VW sought to dismiss the RICO claim against them saying that they did not "participate, directly or indirectly, in the conduct of" the enterprises affairs.  The court held that VW had given direction to the Lopez Group and that was more than enough to satisfy the participation element.  So the court denied the motion for dismissal of the RICO claims.

Russo v. Ballard, 550 F.3d 1004

Ronald Russo is an inventor.  Ballard Medical Products is a subsidiary of Kimberly-Clark.  Ballard Medical Products has six subsidiary companies: Medical Innovations Corporation; Ballard Real Estate Holdings, Inc.; Ballard International, Inc.; Ballard Medical Products (Canada) Inc., dba Preferred Medical Products; Mist Assist, Inc.; Plastic Engineered Products Company.  (http://www.fundinguniverse.com/company-histories/Ballard-Medical-Products-Company-History.html)  Ballard had one product line that allowed for sucking fluid from a patients airway while simultaneously giving the patient air to breath.  Russo designed this device for Ballard.  When Ballard couldn't get the FDA to approve the device for use for longer than 24 hours, Russo was contacted again about improvements to the device.  Russo agreed to show Ballard the improvements he had made but conditioned the disclosure on a confidential disclosure agreement.  After signing the confidential disclosure agreement, Ballard and Russo were not able to come to an agreement about licensing Russo's innovations.  Russo asked for his materials back and Ballard told him that the materials could not be found.  Ballard was actually using the materials and patented inventions based on Russo's materials, they also used Russo's materials to introduce a new product to the market. Ronald Russo sued Ballard Medical Products because he said they misappropriated his trade secrets and breached the parties' confidentiality agreement by incorporating some of Russo's innovations into Ballard's medical devices without Russo's consent.

At district court a jury found for Mr. Russo and gave him $20 million in damages.  The Jury awarded $17 million in unjust enrichment and $3 million in damages for the breach of the confidentiality agreement.  To make a point: Ballard was forced to pay $20 million for innovations that Russo offered to license to Ballard for 3% of sales and a guarantee of $50,000 a year.  Ballard appealed and argued that Russo's state law claims were pre-empted by federal patent law.  On appeal Russo claimed that the district court made a mistake by not adding pre-judgment interest to his award.  This court affirmed both decisions.

The court said that although there was a substantial issue of patent law involved in the case, having a substantial issue of patent law does not pre-empt the trade secret complaint.  They held that this logic was true for Russo's trade secret claim and his breach of contract claim.  The court went on to say that there are three types of pre-emption: explicit, field, and conflict pre-emption.  The court held that conflict pre-emption applied in this case but that "[c]onflict preemption[sic] arises when state law [']stands as an obstacle to the accomplishment and execution of the full purposes and objectives of congress,['] as expressed in this case in the Patent Act... When it comes to assessing this question, two particular doctrinal strands bear upon our analysis, one illustrated by Kewanee Oil, the other by Bonito Boats..."

In Kewanne Oil, the court in that case concluded that patent law and state trade secret law usually complement each other.  The court in that case held that no one would run the risk of losing exclusive rights to their invention, guaranteed by the patent system, in favor of the much more circumventable rights of a trade secret.  In Bonito boats the court held that as long as the trade secret protection requires secrecy there is no conflict with a patent law system that requires commitment to the public or application for patent protection on disclosure of that trade secret.

The court considered Ballard's assertion that Russo's  complaint challenged patent law's presumption of inventorship.  The court held that Russo's complaint didn't attempt to be named the inventor of the patent or seek any of the rights granted by the patent.  The court felt that this showed that there was no need for pre-emption of the state claims by federal patent law.  The court went on to say that the only reason Russo even brought the subject of patents up, was to show that Ballard had misappropriated Russo's trade secrets.

So in the end the court, once again, held that there is no inherent conflict between trade secret law and federal patent law.  I think what is also important is that the court went on to say what might cause a conflict, citing that the complaint didn't ask for a reassignment of patent rights as a remedy for a state law trade secret cause of action.  That's important because it gives practitioners a fairly clear way to allege conflict pre-emption for trade secret cases in the future.

Red Herring: comparing income tax to corporate tax or capital gains tax

Raising capital gains tax, payroll tax, or corporate tax is not comparable to raising income tax.  There are two different types of math and public policy going on there.  If someone compares the two they are throwing you a red herring and playing you for a chump.

Capital gains tax is a percentage paid on positive returns on investments for capital expenditures, investments in items whose benefits are to be gained beyond the taxable year.(house, long term stocks, new kitchen, research and development of a new product etc.)  The public policy is to tax people and corporations on money they make off of good investments that they didn't deduct for.

Payroll tax is a percentage paid by a corporate entity that is based on how much they are paying their workers.  This can include the amount that they are required to withhold for soc. sec. and unemployment, but in some states and nations it also includes a percentage of tax paid based on the salary that the company pays a worker.  The public policy is that the government can generate revenue based on how much their economic ecosystem can afford to pay people.

Corporate tax is a percentage of corporate taxable income paid to the government by a corporation.  The percentage paid is based on the taxable income of the corporation and here are the brackets
taxable income:
<50k 15%
50k<>75k 25%
75k<>100k 34%
100k<>335k 39%
335k<>10M 34%
10M<>15M 35%
15M<>18.333M 38%
18.333M< 35%

That is just the federal corporate tax; there is still a state corporate tax in most states.  The public policy is to tax corporations for making money and not paying it out or reinvesting it in non-capitalized ways.

Income tax is something paid by individuals which is a percentage of their taxable income.  The U.S. system is currently bracketed meaning you pay a different percentage based on what your taxable income is for the taxable year.  The public policy is to tax people for their use of the federal government's services.

All these taxes come at different times, have different requirements, and different implications.  Comparing them shows a lack of understanding of the tax code at best and a intention to deceive at worst.

Copyright Lifespan

Works created on or after January 1, 1978: Life of the artist plus 70 years, from point of creation.  For anonymous work, 95 years from first publication or 120 years from creation, whichever is shorter.

Works created before January 1, 1978, but not published or registered by that date: same as above.  Also can't expire before December 31st, 2002.

Works created and published before January 1, 1978: 28 years from the time that it was published with a copyright notice or registered with the copyright office with an option to renew, in the 28th year, for another 19 years.  For works that existed between 1976 and 1978, or works that were restored under the Uruguay Round Agreements Act, they could get an 67 year renewal term, which would mean a total of 95 years of protection.  And if you think 95 years is ridiculous you can thank Mr. Sunny Bono.  

Louis Vuitton Malletier v. Akanoc Solutions Inc., US app 9th circuit, slip opinion Nos. 10-15909, 10-16015

This case dealt with Contributory Copyright and Trademark infringement, and damages.  Defendant rented server space to website hosts that had websites with links to an email address that would let people buy fake Louis Vuitton gear.  LV sent cease and desist letters to the website hosts and the company that leased server space.  When the cease and desist letters didn't do anything Louis Vuitton sued for contributory copyright and trademark infringement.  The lower court found for VL but the appeals court took it up to decide if the jury instruction was wrong, if the judgement as a matter of law was wrong, and whether or not the damages were wrong.  Most importantly to me, though, was the court's holding regarding the trademark infringement, which I discuss below.

The court said that LV had to show that defendant continued to supply its services to someone who the service provider knew or had reason to know was engaging in trademark infringement. Inwood Labs, Inc. v. Ives Labs., Ince., 456 U.S. 844, 854 (1982).  Also, because the defendant was a service provider, LV had to show that defendant had "[d]irect control and monitoring of the instrumentality used by a third party to infringe".  Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999).  The court reasoned that the defendant had control because it had direct control over the "master switch" that kept the websites online.  The court further held that Defendants contribution to infringement doesn't have to be intentional for liability to exist.  The court decided that LV only had to show that defendant had actual or constructive knowledge that the services they provided were being used for trademark infringement.

US v. Pendelton, US 3rd cir. slip opinion No. 10-1818

Pendleton had sex with a 15y/o boy in Germany.  He was convicted by a German court and served 19 months in a German prison.  When he was released the German government deported him to the United States, where he was charged with engaging in noncommercial illicit sexual conduct in a foreign place, in violation of 18 U.S.C. sec. 2423(c) and (f)(1).  This law was part of the PROTECT act that criminalize sex with minors in foreign places.

Pendleton was convicted and sentenced to 30yrs in prison.  He appealed the decision saying that venue was improper in Delaware and that congress doesn't have the authority to regulate non-commercial activity in a foreign land.

Defendants in a criminal trial have the constitutional right (art. III sec. 2 cl. 3) to be tried in the district where the crime was committed.  Pendleton claims that because he left for Germany from the Eastern District of New York, Venue was only proper in the Eastern District of New York.  The court disagreed with this assertion saying that "[a] court must initially identify the conduct constituting the offense (the nature of the crime) and then discern the location of the commission of the criminal acts."  The court noted that travel to Germany, although part of the crime, was not the main part of the act that congress sought to outlaw.  The court then cited 18 U.S.C. sec. 3238's venue provision, that stated venue will be proper in the district where the defendant was arrested, which for Pendleton, was the district of Delaware where he was tried.

After the Jurisdictional element was solved the court, at length, discussed the constitutional element of Pendleton's defense.  The court decided that Congress had the constitutional authority to pass such a law and allowed the conviction to stand.

This shows a liberal reading of venue provisions in international criminal cases.  The decision also didn't rule out making venue proper in another district, like the one Pendleton left America from.  So, venue is proper where you left from or where you came back to, absent some part of your crime being committed in America or a statute stating otherwise.

Burning the Ships by Marshall Phelps and David Kline

Marshall Phelps was the leader of the Intellectual Asset(IA) team that led to $2 billion in one year.  In addition to the ear catching sound of two followed by a billion, the achievement was important because it gave the business leaders of the day an idea about what effective IA management could accomplish in dollars and cents.  In his and David Kline's book, "Burning the Ships", Phelps takes the paradigm of effectively managing IA to the next level and explains how IA can be used to cement deals, earn industry respect, and the like.  In Burning, Marshall talks about the ideas and influences that went into Microsoft's trend setting deal with Toshiba, the recovery from antitrust suits, dropping non-assertion of patents clauses from all of their supplier agreements, and the push for Microsoft to become more open.  I think the most interesting part of the book has to do with his philosophies and different management practices though.  As far as usefulness, It's not; At least not to me.  This book reminded me of "The world is flat" by Thomas Friedman, Where any 20 something who has been involved in any kind of technology field will immediately recognize the tenants of the book as forgone conclusions.

One of the first things that Mr. Phelps talked about was how you have to collaborate with other companies to make your customers happy.  His insight was rare in the business environment where customer satisfaction was seen in a quarterly dollar and cents light.  Mr. Phelps was able to get outside the corporate bubble and make the case that making Microsoft products play nice with other products would increase market share in the long run and make other industry segments more likely to use Microsoft's products.  For instance, server side software is a classic example of a mish mash between Microsoft and Linux suppliers for software.  Mr. Phelps, while at Microsoft, made it a priority to work out a deal with one of the leading Linux service providers, Novell.  He went on to explain the benefits of this as being both customer satisfaction and better standing in the industry.  He also strongly hinted that a Microsoft-Red Hat deal was in the works, but confidentiality agreements kept him from divulging more information.

Mr. Phelps saw the litigious nature of current IA planning as a drawback.  He made his point with a quote from Steve Ballmer, Microsoft CEO, "The company has made it a priority to do all we can to end these legal issues and to do so in a way that increases collaboration with other companies."  Mr. Phelps also talked about how he started to internalize a lot of services that they used to farm out to external firms, like patent drafting. He said that by internalizing things like patent drafting it saved them money, raised patent quality, and also gave them more flexibility with their filing procedures.  He instituted "forward invention sessions" in the company where patent researchers would prepare reports for technology heads telling them what sort of technologies were in the market and available for use.  This got the Tech leads thinking about different ways to collaborate with other companies and different ways to leverage their own technologies in the market.  Mr. Phelps said of his collaborations with entrepreneurs, "the biggest benefits is that we got a lot of entrepreneurs and companies looking at the fact that Microsoft can be a good partner, a good collaborator.  that's key."

The point of IA acquisitions is not to "produce a profit -- at least not directly, or in the short-term -- but rather to acquire needed technologies, build partnerships, achieve strategic objectives, and/or resolve disputes."  This is a direct quote that I think hits the nail on the head.  Companies have to play well with others but most importantly a company has to have a goal in mind; like Google's "organize the world's information".  When IA is 80% of your assets, as it is with lots of technology companies, then you have to effectively leverage that asset to meet your business goals, or you are not doing your job.  He used that point to make a second point: if you ran a concrete factory and you didn't know where 80% of your assets were you would be fired.  Somehow, though, it is almost common place for a technology manager not to know or understand where his IA is.  I think this was the most important part of the book, saying that companies not only need to look at IA as something more than just a legal issue, but also an asset; as the name says.  By collaborating with other companies new applications and know how are inherently brought in and it make the idea worth more.  If the idea has been protected, patent, copyright, trademark etc., then the idea brings more value to the company.

So, like I said in the beginning the ideas and procedures outlined in this book are not really ground breaking to me, but it articulates the sort of ethos an IA manager should bring to his/her work.  Know what IA you have, use your IA to build value.  To give credit where credit is due, Mr. Phelps figured this out when his equally tenured colleagues were still bumbling about in the old-world IA mindset.

America Invents Act -- Patent Reform(bullet points)

• Also called the patent reform act of 2011
• It used to be that the first applicant to invent the subject matter of the patent would win in a competition with another inventor for the same subject matter.  So, If Leibniz and Newton weren't dead, and they both came up with the same idea again, only this time it was patentable, they would just argue in front of the patent office about who invented it first; showing evidence to prove their point.  Now, whoever files their application first will win.  So, Leibniz and Newton would have to race to the patent office and file an application for a patent to see who would get the patent rights on their idea.  
• Sometimes there are rules of procedure in a court room that help the judge decide how he will reward the winning party.  Before, Judges in patent cases had more lee-way in determining how winnings would be calculated in patent infringement suits.  With the new legislation, Judges have to decide on a set of factors for calculating winnings; prior to hearing evidence about those factors.  So, judges will have to hear evidence on what factors should be considered when calculating how much money is to be paid, and then, and only then, can they start to hear evidence proving or disproving the factors that they laid out.
• Damages or winnings are the reason you sue.  When you seek damages, you seek to get back whatever money you lost as a result of the person-who-you-are-suing's infringement of your patent rights.  Willful infringement is the plaintiff's ticket into the realm of "enhanced" damages.  The new law sets a higher standard for willfulness.  That means it will be harder for plaintiff's attorneys to show that a defendant was "willful" in his/her infringement of the plaintiff's patent rights.
• There are three new ways that a regular person can challenge the validity of a patent or patent application.
• Sometimes people lie and claim they have a patent by putting a mark on their product saying there is a patent on the product, when there is no patent on the product; that is called a false marking.  Regular people used to be able to sue somebody who used false markings.  Now, only the government or a competitor of the person who uses false markings can sue the person who is falsely marking things.
• It is now easier for a corporation to file an application when the inventor of the subject matter in the application is not cooperating with the application process.
• In the old patent laws, if an inventor didn't explain what he thought was the best way of practicing his invention (best mode) in the patent application, and the application became a patent, then the patent could be invalidated because the inventor didn't explain the best mode in the application.  Inventors can file their application and not talk about the best mode now, without fear of invalidation of their patent.
• There used to be a fee break for "small" entities, now there is a class of fees below that; and it gives further fee breaks to "micro" entities.
• Finally, the USPTO now has the authority to set it's own fees.  The USPTO can set their own prices for examining applications.  

In Coca-Cola Bottling Co. of Shreverport, Inc. v. Coca-Cola Co.,  107 F.R.D. 288 (D.Del., 1985), there was a dispute between the bottlers and the soda maker as to whether the soda maker's soda was covered in the bottling syrup pricing agreement.  The bottlers moved for the court to compel the soda maker to turn over formula information for several sodas.  The court held that the formula information was a trade secret, but that being a trade secret doesn't preclude it from discovery.  The court decided that any discovery request for the information was subject to strict protective orders.

The case dealt with the secret formula for Coca-Cola, known by only two people in the company.  The only written record of the formula is kept in a security vault at the Trust Company Bank in Atlanta, Georgia.  Coca-Cola Bottling Co of Shreveport, Inc v Coca-Cola Co, 107 FRD 288, 289; 4 Fed R Serv 3d 1291 (D Del 1985).  Coca-Cola bottling's attorney was Edmund N. Carpenter, II.  Carpenter was an attorney in Delaware at the time.  Carpenter held several positions with the Delaware Bar until his death in 2008.  His funeral was covered by the Wall Street Journal.  The attorney for Coca-Cola was Richard Allen of Morris, Nichols, Arsht & Tunnell LLP.  The plaintiffs said that Coca-Cola had to give up the formula for discovery as a part of a contract dispute, which was directly related to the formula for diet Coke.  Coca-Cola argued that the formula was not relevant and that giving up the formula would cause too much damage to the company.  Id. at 290.  


In ruling on the matter, Judge Murray M. Schwartz, said that he was well aware of the risks posed to Coca-Cola in divulging their formula and that exposing trade secrets is a powerful tool in the hands of plaintiffs to force settlements that might not do justice for the defendant; because the defendant would rather settle than let the plaintiff gain access to the defendant's trade secrets.  Id. at 290.  Despite this finding, Judge Schwartz held that trade secrets are not absolutely privileged information.  Id. at 292.  The holding was that when trade secrets are "sought during discovery, the governing relevance standard that the movant must satisfy is the broad relevance standard applicable to pre-trial discovery, i.e., the movant must show that the material sought is relevant to the subject matter of the lawsuit."  Id. at 293.   The reason Judge Murray cited for this standard came from Covey Oil Co. v. Continental Co., 340 F.2d at 999.  In Covey, it was held that in the absence of an applicable privilege "[j]udicial inquiry should not be unduly hampered." Id. at 999.  Further, Judge Murray cited Judge Learned hand in his opinion saying that disclosure of trade secrets may damage defendants; "[t]hat is, however, an inevitable incident to any inquiry in such a case; unless the defendant may be made to answer, the plaintiff is deprived of its right to learn whether the defendant has done it a wrong."  Coca-Cola Bottling Co of Shreveport, Inc v Coca-Cola Co, 107 FRD 288, 293; 4 Fed R Serv 3d 1291 (D Del 1985).  


Judge Murray went on to balance the harm done to Coca-Cola against the harm done to the defendant by not having relevant information disclosed, and decided that the formulae had to be disclosed.  This result is not too surprising given the invocation of a right of the plaintiff "to learn whether the defendant has done it a wrong."  Id. at 293.  Full disclosure: I never won an award for the best grade in my evidence class, I am also not a practicing attorney.  That being said, I don't remember a right of the plaintiff "to learn whether the defendant has done it a wrong."  Id. at 293.   When Judge Learned Hand says this in his decision in Grasselli Chemical Co. v. National Aniline & Chemical Co., 282 F. 379, the Judge does not cite a source for this right.  This right has materialized through the writings of a famous judge; and now it is law.


The problem with this new right is that it flips the process.  First, you complain that you have been wronged, in a complaint.  Second, you discover evidence that is relevant in tending to prove or disprove the matter at hand.  I have never heard, until Judge Hand told me, that first you start a trial by filing a complaint, and then you learn whether or not you have been wronged; further, you have a right to learn if you have been wronged.  I can't say that I disagree with the result but the reasoning makes me very uncomfortable, especially when it comes from such a noted judge as Learned Hand. 

Take-away from "Securing Intellectual Property" by syngress

Unprotected Intellectual Property(IP) is worthless IP.  An IP protection program is a must for every company.  To have a successful protection program all IP must be identified and the associated risk for each idea evaluated.  The Plan has to be built around the company, and the plan has to be implemented like any other project.  Throughout the implementation, the plan will have to be tailored to fit seamlessly with the successful business that is paying for its implementation.  Finally, the executors of the plan need to understand the plan and agree with the implementation.  With special attention paid to those factors an IP strategist sets themselves up for successful protection strategy and a happy client.

Identification is what IP strategists are trained to do from their first day in law school: identify what statutory category, if any, the idea belongs to.  Classifying the associated risk is only a little bit harder than identifying the idea.  The risk of a losing intellectual property to theft or accidental disclosure is a product of: the probability of losing the IP; the vulnerability of the idea; and the impact it would have on your business, if lost.  The probability is a number that you will have to come up with based on how unscrupulous your competition is and how closely you feel you are being watched.  Vulnerability is the adaptability of the IP.  If it's a trademark or patent then you own the rights and disclosing it shouldn't hurt you; it's vulnerability is low. if it's a list of client leads then the vulnerability is high.  The impact is a matter of dollars and cents, how much will it hurt to lose the idea to a competitor or the public.

Building the protection plan is as much a matter of accessing the vectors of threat for your IP portfolio as it is making a plan that works well and intuitive for the people who have to use it.  Books are written on how information should be secured and what vectors supply the most real threat to your IP portfolio, but it is safe to say that a security audit needs to be done and then recommendations should be made based on the results of that audit.  Once you have an idea of your weaknesses the remedies for those weaknesses will be many, and this is the all important part where the security team sorts through the possibilities and sees which ones will be the easiest and most successful to implement.  They make their decision based on the associated risk of each weakness and the cost of implementing the remedy; both monetary costs and human costs.  The most important thing is that the idea-having people not get constrained and the business not have it's profitability capped because of security measures.  Because there won't be anything to secure, if your security measures run the business into the ground.

During the implementation process, some processes will meet with resistance and some milestones will not be met.  At these times, it is important to take stock of the fact that you are there to help the people of the business do their job better.  This means that if something is not working, it's better to look at it from the view point of what you are doing wrong, because blaming the client for not being able to follow your processes is a dead end road;  It's also not what they are paying you for.

The last step is not chronologically the last step but it is the last thing you need to check off before you leave the client: the executors of the protection plan need to understand the plan and stand behind it.  Policies that are understood will be wrongly implemented or disregarded for convenience.  It's important to make sure they fully grasp how the plan works, and what it's purpose is.  Making sure they stand behind it will come secondarily if the executors of the plan understand the plan and see it's value.

Economic Espionage

U.S.C. Title 18 Part 1 Chapter 90 Section 1831 covers economic espionage.  Very basically, economic espionage is the taking of trade secrets and delivering those trade secrets to foreign entities.  It carries a penalty of up to half a million dollars and/or up to 15 years in prison for people who get caught doing it; And 10 million dollar fine for organizations that get caught doing it.  

The law requires only that the perpetrator intends their crime to benefit a foreign government, foreign instrumentality, or foreign agent.  The acts, with respect to trade secrets, that are prohibited are well enumerated.  They include all sorts of stealing, carrying away, and fraudulently inducing the trade secret owner into giving up possession of the trade secret.  The law also includes, as illegal acts, photocopying, uploading, destroying, replicating in any way, or receiving information that you know to be a trade secret.  Attempts to do any of those acts are also outlawed.  Finally conspiring with others to do any of those illegal acts is also illegal.

The law against economic espionage is broad and requires limited involvement in a scheme to steal trade secrets for the benefit of a foreign entity, for strict punishments to be imposed.  For this reason it is important that potential victims of economic espionage label all of their trade secrets as confidential.  The potentially accused must make sure that they handle other's trade secrets with utmost confidentiality, to avoid being implicated in plots to steal trade secrets.

Deciding between a Patent and a Trade secret

A Patent gives an inventor a short license to exclude others from using their invention.  A patented invention is supposed to be a new, useful, and non-obvious machine, article of manufacture, process or composition of matter; or improvements to any of those things.  A Trade secret is any secret that a business uses that is worth money to the business because of its secrecy.  Trade secrets are perpetual and a person can sue any party that steals their trade secret.

A trade secret can be had instantly for the cost of implementing security processes that make the invention a secret.  A patent takes four years and filing a patent starts at $12,000.  When you apply for a patent, whether or not you are awarded the patent, the patent becomes public information (with few exceptions).  When you decide to make something a trade secret, you keep it a secret and it does not become public information.  A trade secret runs the risk of being the subject of a patent by a third party, in that case the trade secret user could be held to be infringing on the patent owned by the third party; independent creation of an invention is no defense to allegations of patent infringement.  Patent law is more protective than trade secret law in that it allows for remedies against infringers regardless of the infringers' intent.  Trade secret law only allows for remedies against people and businesses who steal the trade secret from the trade secret owner.

The valuable information that can be protected by trade secrets is much broader than the inventions that can be protected by patents.  A good rule of thumb is that if your invention can be easily reversed engineered then you should get a patent, if it makes economic sense to do so.

5 y's of idea analysis?

Intellectual property is defined by the World Intellectual Property Organization as "creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce."  Ideas are usually a combination of all aspects of intellectual property, even if only certain aspects are protected by law.  In order to adequately protect an idea the analyst must understand the whole idea.  One very important part of the whole idea is it's purpose.  A five y analysis of an idea's purpose helps the analyst to better understand the purpose and therefore better protect the idea.  A five y analysis is done by asking the inventor why they are pursuing the idea, and then asking them four more times why they answered the way they did.

For example, your client has an idea for a new and improved bird feeder.  When you ask her why she wants to work on this idea she says, to make money.  When you ask her why she wants to make money, she tells you that she wants to use that money to develop more interesting and aesthetically pleasing bird feeders.  When you ask her why she wants to do that, she says she is concerned by the lack of certain birds in the area and she thinks that if she made cooler looking bird feeders she might be able to help bring those birds back.  When you ask her why she wants to bring certain birds back to the area, she tells you that those birds are good indicators of ecological health of a certain area and she thinks that by bringing them back she can improve the ecological health of the area.  When you ask her why she wants to improve the ecology where she lives, she tells you because she likes living in a place with a healthy environment.  

In this example you can see that the first question's answer doesn't begin to uncover the purpose of the invention.  If the analyst were to base his analysis and strategy on the answer to the first question he would completely ignore major aspects of the inventors idea.  The analyst would draw artificial boundaries around the idea that weren't there before the interview.  

The other benefit of the five y analysis, is that it gets the inventor thinking about their motivations and all the applications of their idea.  This is important because the idea may be bigger than inventor realizes and the analyst doesn't want to miss that potential and the inventor benefits from it as well.

Considerations for a licensing agreement

Here is a list of things to think about when licensing your inventions.  This is not legal advice or an opinion.  

• Pre-contract conditions - what are the facts that lead the parties to contract? Current market sales, forecasts, technology trends, and understandings etc.
• Scope of license - what is being licensed? geographic exclusivity, product exclusivity, profit margin requirements, distribution requirements etc.
• What is being licensed - specifications of the licensed property?
• Timing - how fast should it come to market, how long is the license for, what is the market schedule?
• Options and contingencies - who owns renewal rights (see stewart v. abend ), option to buy, infringement or invalidation of the idea?
• Money - initial fees, type of royalty, amount of royalty, schedule of royalties.
• Advertising - who will pay for advertising and who will coordinate advertising?
• Approval Process - who is in charge of approving product changes.
• Oversight - who keeps records of the financials and product performance, and what triggers an action based on the financials or product performance?
• Quality Control - who does it?
• Insurance - who carries and what is carried?
• Confidentiality - what is considered confidential and how should parties keep it confidential?
• Ending the license - how can it be terminated and what happens when it's all over?
• Disputes - choice of law, jurisdiction, venue, discovery.
• Assignability - can either party assign rights or responsibilities?
• Integration - this is the whole agreement.
• Amendments - how can the contract be amended?

Stewart v. Abend, 495 U.S. 207

Sandra Day O'Connor -
"It Had to Be Murder" published in 1924 in Dime Detective magazine, written by Cornell Woolrich.  Woolrich assigned magazine publication rights to Popular Publications, Inc.  Woolrich assigned movie rights and promised to renew and re-assign the copyright after 28 years.  Woolrich died before renewing and the executor of his estate assigned the renewed copyrights to Abend.  Jimmy Stewart and several other people, after obtaining the right to make a movie from Woolrich, made a movie called "Rear Window" based the the story "It Had to Be Murder".  After being paid off in the initial release of the movie, Abend (a subsequent owner the renewal rights of the story) sued when the movie was distributed in 35mm and 16mm.

Held:
1)  Any assignment of renewal rights made during the original term is void if the author dies before the renewal period.
2)  Assignee may continue to use the original work only if the author's successor transfers the renewal rights to the assignee.
3)  like all purchasers of contingent interests, Stewart took subject to the possibility that the contingency may not occur.
4)  Congress would not have stated explicitly in 17 USC sec. 304(c)(6)(A) that, at the end of the renewal term, the owner of the rights in the pre-existing work may not terminate use rights in existing derivative works unless congress had assumed that the owner continued to hold the right to sue for infringement even after incorporation of the pre-existing work into the derivative work.
5)  The argument that this gives original works' owners too much economic advantage which leads to the stifling of creation of art, is an argument better directed to congress.