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.

The OEM and the Swiss engineering services provider

An OEM is auto industry jargon for an Original Equipment Manufacturer. It's a well known term, within the industry, to describe the car company. The OEM is the last step in manufacturing before the car is shipped off to dealers for sale. Some well known OEMs are Ford, Toyota, and Daimler. In the following hypothetical our OEM makes electric vehicles but doesn't develop the technology for the vehicles. Because electric vehicles are state of the art and their manufacture is a complicated process, it is completely feasible that an OEM could have the manufacturing expertise to develop the manufacturing system for making an electric vehicle but lack the engineering and scientific expertise to develop the vehicle. This is not the usual set up. In the industry, OEMs decide all the time to buy parts from external suppliers, this is called a 'make or buy' decision and they are integrated into every development timeline in the entire industry. Usually though, when you buy a part from a supplier, you buy the part already made. In this default setup suppliers have a say, sometimes too much of a say for the OEM's taste, in what parts make it to market. This is not the case in our hypothetical. In our case an OEM only wants a design from the Swiss engineering service provider (SESP). The SESP is uncomfortable with the amount of liability they would have in case of a massive failure of the part and they want to contractually limit their liability to 5% of the contract price. It can be assumed that the contract is small enough that 5% of it would not cover the legal fees if there were litigation on the issue. Nonetheless, our SESP is not budging on the issue and has insisted that the contract be litigated in Swiss courts using Swiss law. The project will not go through without the SESP and the project manager has come to you, Friday afternoon, looking for a fix that will protect the OEM from liability caused by design flaws in the SESP's design. The contract draft goes out Monday and it is too late to insert anything but minor reasonable clauses that haven't already been discussed.

There are three types of liabilities or damages that a potential plaintiff could sue for if the courts find that there was a design flaw that led to some sort of damage on the plaintiff: punitive damages, contractual damages, tort damages, and statutory penalties. Punitive damages are awarded by some courts when they want to make an example of the defendant to convince other people in the public not to act like the plaintiff. A good example of this is the Ford Pinto, where it was shown that Ford knew of a design defect that was killing people and decided not to fix it in order to save money. Contractual damages are damages that arise from breach of contract; The customer reasonably expects a car that doesn't blow up, you sell her a car that blows up, you owe her money for a new car. Tort damages are damages for injuries to the person. The customer reasonably expects a car that doesn't blow up, you sell her a car that blows up, she loses an eyebrow, you owe her for whatever her eyebrow is decided to be worth. Statutory penalties are fines assessed by the laws of the state for whatever law you broke. The state doesn't want their citizens being blown up, so they write a law that fines car companies 10$ every time they sell a car that blows up. You sold 20 cars that blew up and you now owe 200$ to the state. When you do something that incurs these types of damages you are considered liable to pay the damages. These are the types of liabilities that the SESP seeks to avoid and your clien the OEM would like to see to it that any damages caused by the SESP's design are carried by the SESP.

The SESP can bear liability by being sued directly by the customer or by being sued by the OEM after the customer sues the OEM for damages. We won't worry about the customer suing the SESP because that is not what the OEM is concerned with. If the Customer sues the OEM the OEM will want to pass liability off to the SESP which will be complicated by the fact that the SESP limited their liability. So here are a list of things done in industry to make the contract more favorable to the OEM. It is important to note that the industry standard is to not limit liability and a liability limiting clause can be circumvented by showing a breach of contract that would invalidate the contract and make the SESP liable for at least the price of the contract and maybe more. This situation would arise if the OEM could show that the SESP didn't deliver designs of the quality promised in the contract. So our goal is to get the OEM the biggest advantage they can have before court to receive the maximum amount under the liability limiting clause and possibly circumvent the clause by showing a breach of contract.

Discovery is the process by which one party requests and receives relevant information from the other party, with the intent of using some of it to build their case against the other party. In Europe their discovery procedure makes a lot of things non-discoverable that would otherwise be discoverable in America. The goal with discovery in the contract is to get as much information as possible before litigation. OEM can do this by requiring failed parts to come first to the OEM for testing which means that the OEM will have the most complete test results for trial. The OEM should also request that all quality information from the SESP be shared in real time with the OEM. The quality information will be of great help in deciding if their was a design problem and what the SESP was doing to fix it. The OEM should also request internal feasibility studies; design meeting minutes and reports; and design decision charts . If the SESP made cost a priority over safety, or timeline a priority over durability, those sorts of decisions will be borne out in black and white by pugh analysis and other decision making and feasibility devices. All of this is well within the rights of the OEM in the name of quality control, but obviously has an advantage in terms of potential litigation also.

Not all facts have to be decided in a court, Some facts can be settled before you even come to court. Facts such as the address of the party, the description of what is being purchased etc. can be spelled out by the contract. It's important to make sure that all of those facts lean in favor of your client. Intent is something that is difficult to prove in court but if it's spelled out in the contract, being written makes litigation easier. A clause that states “It is the intent of the SESP to create state of the art designs that are unparalleled in their reliability and quality”, might help. That sentence squares it away that both parties thought that they were buying/making the best designs on the planet and that is a high bar to meet. With the intent defined by the contract in such an impossible way, the burden of proving that the SESP didn't fulfill their part of the bargain is easier and could lead to a refund of the contract price.

By opening up relevant information before pre-litigation starts, and per se settling facts in the OEM's favor you have given your client the OEM a leg up. If it ever comes to the daunting task of suing a Swiss company in Swiss courts for liabilities on a contract where they have contractually limited their liabilities, your client will be better situated.