Biotech Moving from Patents to Trade Secrets

TMCNet's U.S. Patent Reforms Might Force Firms to Rely on Trade Secrets has several interesting points. First, it serves as a reminder of the interplay between patents and trade secrets. Secondly, it notes (what should be a familiar refrain if you have been reading my other articles on trade secrets) that effective trade secrets require planning and enforcement by the business.

The flight away from patents can be seen in filing statistics. The number of chem/bio patents filed at the USPTO rose from 30,000 per year in the mid-1990s to 45,000 in 2001. By 2006, the level of filing had fallen back to where it stood 10 years earlier. Similarly, at the European Patent Office, there was a 13 percent year-on-year increase between 1995 and 2000, followed by a 6 percent year-on-year fall from 2000 to 2003.

But, Gollin said, 'biotech is still innovative, so where is innovation going if not into patents?'

The answer seems to be that the scales are tipping back in favor of keeping trade secrets, posing the question of whether biotechs prefer the patent or trade secret approach when it comes to protecting their intellectual property."

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The increased reliance on trade secrets and know-how to protect IP raises cultural and management issues, given that the easiest route for those types of information to be disclosed is through current and former employees.

That is a particular problem in biotech said Kerry Flynn, vice president of intellectual property and licensing at Shire Human Genetic Therapies Inc. "It is an incestuous community; employees leaving to join a competitor down the street makes keeping trade secrets a bit of a challenge."

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As a result, the company has set up a formal process to protect trade secrets. In addition to signing nondisclosure agreements on joining Shire, new employees are briefed by a lawyer on the company's policy. They are reminded also of their duty of confidentiality to previous employers, in a bid to ensure that Shire cannot be accused of stealing trade secrets from other companies.

Online Resources: The IT Law Wiki

Need to know more about the law and information technology? The IT Law Wiki describes itself this way:

This wiki is an encyclopedia of the legal issues, cases, statutes, events, people, organizations and publications that make up the global field of information technology law (often referred to as “computer law”).

What business, what lawyer could not use such an introduction/guide to computer law?

Trademarks: Champagne

I suggest reading Produced in Champagne, but What Do You Call It? from The New York Times is not the typical trademarks article. First, it is European although the broader enforcement issues of a trademark remain the same. Second, it involves a treaty rather than a statute, but remember under our federal constitution that treaties are a source of law. Mostly, it does show the power of trademarks.

Valuing Intellectual Property

The Indianapolis Business Journal's Valuing Vonnegut gives us an Indiana resource for valuing intellectual property.

"Stating such influence in monetary terms might seem like a monumental task, but there are surely many accounting firms larger than Pelligrino’s that would have loved the job. Vonnegut’s longtime attorney called Pellegrino out of the blue in November. Donald Farber, counsel with New York-based Jacob Medinger & Finnegan LLP who represents the Vonnegut estate, declined to comment for this story."

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Pellegrino said Farber was aware of his work. The 33-year-old local entrepreneur has been building a reputation in the intellectual property valuation niche since he founded his firm in 2003. Once the CFO of Fort Wayne-based softwaremaker Logikos Inc., he struck out on his own when he saw a demand for appraisals of early-stage, high-tech firms.

His fees start at $4,000, but—depending on the complexity of a valuation job—can rise to as high as $100,000. He wouldn’t say what he’s being paid to value Vonnegut’s work.

Not all his jobs are so high-profile. Entrepreneurs use Pellegrino’s evaluations as the basis of negotiations with investors. Others find them useful for tax purposes, or in litigation. His clients have included Uni-Systems LLC, the Minneapolis-based company whose patented technology will allow the roof on the new Lucas Oil Stadium to safely retract. Two years ago, Pellegrino helped information technology trade group TechPoint successfully lobby the Indiana General Assembly for a change in tax law that allows firms to more accurately write off their investments in software.

Valuation doesn’t always establish a high price. Pellegrino said many business owners are disappointed to find their intellectual property isn’t as unique or precious as they expected. There have even been times, he said, that his appraisal established a negative value for an asset. That means it would cost money just to unload it.

Copyfight

An interesting blog that goes a bit beyond the usual copyright blog, Copyfight :

Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

I call this cutting edge stuff, so take a look now.

Who Owns Intellectual Property?

Who Owns Intellectual Property? from HBS Working Knowledge has some things to say both to lawyers and businesspeople.

"Turning to the Internet itself, and particularly to content-sharing sites, the matter of ownership is challenged in a different way. Content produced by news media as well as individuals acting as professionals or amateurs is being copied, spliced, and represented essentially as something so new and unique that it is often downloaded by hundreds of thousands of viewers who might not have watched the original material. Who owns the result? Does anyone owe others for the use of the content? If so, how much and for what share? Or has the culture of 'free' become so deeply imbedded in the minds of a new generation of users that content developers can only hope for partial, occasional, or eventual financial rewards for their efforts?"

The Internet has brought into question current laws on copyright and patent. Patent law underlies our computer age - Microsoft has patents on Windows and Intel has patents on the computer chip. On the other end of the spectrum is Linus and open-source software.

Let me be explicit about why this is so important: money, lots and lots of money are at stake here. Record and movie companies find themselves warring against the online-free ethos. (For an example of this see my post here.) I think they are losing but that is besides the point this morning.

Until this article, I thought trademarks would probably remain out of the copyright/patent/Internet fight. The following makes me wonder about that or if we will see a morphing of trademarks:

Wolff Olins' homepage presents a provocative redefinition of brands as practical platforms that enable people to do things. In its words, "As brands become less the property of an organisation and more the banner of a movement, ownership will become even looser. Logos will be things other organisations, and individuals, can borrow and adapt." That belief, they maintain, will require that some companies, in their own best interests, relinquish control over brands and "be more generous" with consumers. In other words, they take the risk of transferring ownership and quality control of what used to be called their brand to others. In this case, who owns the intellectual property?

Read the full article and the comments for a fuller explanation of what is going on.

Trade Secrets: Today's Roundup of Litigation

No claims made that these stories represent all of the new trade secrets litigation but these are the ones caught by Google Alerts.

IOSTAR entangled on earth:

IOSTAR and its founder and CEO have filed suit against the three former associates, alleging theft of corporate secrets in order to develop competing satellites. In a counterclaim, the three allege that the CEO has misappropriated millions of dollars and violated tax and securities law.

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In its lawsuit, IOSTAR charges that Stuart, French and Busch "have systemically misappropriated IOSTAR's trade secrets."
They did so, the suit alleges, in order to develop a space tug that would compete with one being fashioned by a company called SWANsat, in a project in which IOSTAR is participating.
"We think the claims against Mr. French are groundless," said Sam Straight, French's Salt Lake City attorney.
Stuart and Busch declined comment about their dealings with D'Ausilio, but in their answers to the lawsuit they deny appropriating any trade secrets from their involvement with IOSTAR.

The articles goes on at greater length about the start up problems and possible chicanery. That makes it worth reading for more than the trade secrets.

Former Lubrizol Employee Charged:

A former research and development employee at specialty chemicals company Lubrizol Corp. is accused of selling trade secrets to a competitor in South Korea, federal officials said.

Kyung Kim, 62, of Broadview Heights, was charged Wednesday in U.S. District Court with theft of trade secrets and conspiracy, said assistant U.S. Attorney Justin Roberts. No court date has been set.

For something quite a bit different and foreign: GM brinjal battle goes to HC.

NEW DELHI: It's a classic case of commercial interest vs public interest which could set an important precedent. Genetically modified brinjal — expected to be the country's first edible GM crop — could find its way to your plate soon.

But first, Delhi high court will have to decide whether the company conducting its field trials can keep data on health and environment safety tests out of the public domain on the grounds that the information is a "trade secret".

The data in question comprises toxicity and allergenicity studies and was submitted by Maharashtra Hybrid Seeds Co Ltd (Mahyco), a subsidiary of multinational Monsanto, to the department of biotechnology for regulatory clearances.

Another article having more than interest than only trade secrets. I suspect that in the United States we would see patent issues as well as trade secrets.

Tire maker wins trade secret case:

"Sam Vance, Alpha's sales and marketing manager at the time, was found guilty by 12th Judicial Circuit Court Judge Robert W. McDonald Jr. of giving a pair of overseas competitors everything they needed to steal business away from the Sarasota company."

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Jennifer Compton, an attorney with the Sarasota law firm Abel Band who worked on behalf of Alpha, said the win in the trade secret case was huge for her client.

"This is one of the larger ones in Sarasota County history," Compton said. "This is a very big deal for them. They were almost out of business."

Whether Vance has the wherewithal to pay the $19.7 million remains to be seen.

Ah, the age old question: can the judgment be collected?

A Patent Blog: Patently-O

I keep explaining that I do,actually cannot, practice patent law. I am convinced that a great weakness for many businesses is not knowing enough about patent law. With that in mind, you should check out Patently-O.

If you need a referral to patent lawyer in the area around Anderson, please give me a call.

Patents from Blawg Review

I do not mention Blawg Review. I probably should. Blawg Review is a weekly roundup of law blogs or law related blogs written by different lawyer bloggers. The Invent Blog concentrates on patents and inventions in Blawg Review #146

Music Downloads - The View from Scotland

I have written a few posts on music downloading (such as here) just because I find them to be an interesting confluence of law and business - especially our modern, Internet business. I like using the music business' problem with downloads for explaining that businesses with intellectual property do not sell CD's, or books, or movies. They sell their copyright or patent. Even those selling things like soft drinks or hamburgers have businesses turning on another intellectual property - trademarks.

Which brings me back to Scotland's Sunday Herald and NO BUSINESS IN SHOWBUSINESS?. The articles has lots of interesting bits but here is the conclusion:

If the television and film industry is coping better it is perhaps because unlike with music, they're still dealing in the same discrete bits of entertainment rather than having to deal with the decline of the album and the rise of the individual track.

Forde predicts that there is consolidation on the horizon, as music companies diversify their business models. "Some of the majors stopped calling themselves record companies a while back, and started saying that they were entertainment corporations, which is, I think, a sign of things to come.

"They haven't moved quickly enough for the times, but they're exploring what's out there. They've finally realised that putting out albums is not the be all and end all," he says.

Copyright news - Regulations

The following comes from the United States Copyright Office:

February 11	Due date for comments on cable systems issues (more)
February 22	Due date for comments on proposed clarifications to regulations governing recordation of notices of termination and related provisions (more)
March 24	Due date for reply comments on proposed clarifications to regulations governing recordation of notices of termination and related provisions (more)
March 26	Due date for reply comments on cable systems issues (more)

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Recent Issues

No. 335 – Dec 21, 2007	Bill Introduced: Performance Rights Act
No. 334 – Dec 19, 2007	Attention Cable Operators: An Important Notice
No. 333 – Dec 17, 2007	Bill Introduced: To Make a Technical Correction to Section 119 of Title 17

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U.S. Copyright Office
101 Independence Avenue SE
Washington, DC 20559-6000
(202) 707-3000

General Businsess Information

Take a look at The Small Business Wiki.

What is a wiki? Think collaboration with lots and lots of people. Wikipedia starts its description of wikis with this:

A wiki is software that allows users to create, edit, and link web pages easily. Wikis are often used to create collaborative websites and to power community websites. They are being installed by businesses to provide affordable and effective Intranets and for Knowledge Management. Ward Cunningham, developer of the first wiki, WikiWikiWeb, originally described it as "the simplest online database that could possibly work".^[1] One of the best known wikis is Wikipedia.^[2]

What has this to do with business? If this wiki develops as others have (think Wikipedia), this may be a good resource for businesses - especially small businesses.

Legal Literacy writes about the intersection of law and business - a subject often raised on this blog.

The purpose of this blog is to make visible the links between business and law. It uses current events and stories and to help you learn from other’s mistakes and raise awareness of the legal environment of business — how it can help you and how it can hurt you. The goal is to bridge the gap between these two disciplines to help you unleash the power of Legal Leverage®.

This blog is based on the book The Business Guide to Legal Literacy: What Every Manager Needs to Know About the Law (Jossey-Bass, 2006). As the Wired GC wryly noted, “It’s cheaper than a lawsuit” and is available through your favorite bookseller, including Amazon.

Since I often touch on intellectual property topics (trademarks, trade secrets, copyrights), IPWatchdog.com gives even more information:

IPWatchdog.com is dedicated to providing a free, reliable and easily understandable resource on intellectual property law and related topics. We promise to demystify intellectual property and explain to you what it is, why you would want to consider obtaining intellectual property rights and how to go about obtaining worthwhile intellectual property protection. We also explain various pitfalls to avoid, as well as what you can do to help yourself.

The founder of IPWachdog.com is Gene Quinn, who is a patent attorney, law professor and author. He launched IPWatchdog.com in October of 1999, and since that time the site has been a trusted resource on intellectual property for over 1 million unique visitors who have come here for information and news.

Slightly Old News About Vonage

Since I wrote about Vonage here, I thought I ought to point out Vonage, AT&T Settle Patent Dispute - News and Analysis by PC Magazine.

"Digital phone service Vonage said on Friday it has settled a patent dispute with AT&T."

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Vonage did not disclose the nature of the settlement, which it said occurred on November 7. The settlement was finalized on Friday.

Music Download News - New Tactic from Recording Industry

Since I have written before (here and here and here) about the lawsuits against music downloading, the Washington Post article, Download Uproar: Record Industry Goes After Personal Use, caught my eye.

"Now, in an unusual case in which an Arizona recipient of an RIAA letter has fought back in court rather than write a check to avoid hefty legal fees, the industry is taking its argument against music sharing one step further: In legal documents in its federal case against Jeffrey Howell, a Scottsdale, Ariz., man who kept a collection of about 2,000 music recordings on his personal computer, the industry maintains that it is illegal for someone who has legally purchased a CD to transfer that music into his computer."

I read about the RIAA's theory elsewhere. Distilled to a bare minimum, I do not own my music CD but only use it under a license from the record company.

The industry's lawyer in the case, Ira Schwartz, argues in a brief filed earlier this month that the MP3 files Howell made on his computer from legally bought CDs are "unauthorized copies" of copyrighted recordings.

"I couldn't believe it when I read that," says Ray Beckerman, a New York lawyer who represents six clients who have been sued by the RIAA. "The basic principle in the law is that you have to distribute actual physical copies to be guilty of violating copyright. But recently, the industry has been going around saying that even a personal copy on your computer is a violation."

Yeah, a lot of people can believe this argument - lawyers and laypersons alike.

I cannot but heartily agree with this:

The RIAA's legal crusade against its customers is a classic example of an old media company clinging to a business model that has collapsed. Four years of a failed strategy has only "created a whole market of people who specifically look to buy independent goods so as not to deal with the big record companies," Beckerman says. "Every problem they're trying to solve is worse now than when they started."

I suppose working at the rarefied levels of my profession as the RIAA's attorneys do, they give no thought to the ultimate wisdom of their legal theories. I have a duty to act in my client's best interests and so do these guys. Yet, this litigation does nothing to advance anything for their clients - other than the RIAA as a bunch of greedy thugs.

Trademarks and trade secrets - Important for your Business?

From the San Jose Mercury News Dynamic nature of patent law actually has more to do with all kinds of intellectual property for business.

"Paul Goldstein, a Stanford law professor, has written a new book on the subject. Despite its title, 'Intellectual Property' (Portfolio, Penguin Group) is an easy read and a good guide for anyone starting or operating a company involved with patent, trademark and copyright issues. And is there any other kind?"

The article goes onto a Q & A with the author:

Q Your book, "Intellectual Property" is subtitled "The Tough New Realities That Could Make or Break Your Business." What are they?

A The realities center around the volatility of intellectual property law - not just patents, but copyrights, trademarks and trade secrets. An abrupt change in any of these areas of law can make or break your business.

Q By "abrupt change," you mean. . . ?

A An example: In the early 1970s, Kodak looked at the instant photography business that Polaroid monopolized, thanks to its patents. Kodak had expert counsel, relying on existing patent law which imposed a high standard, telling it that these patents were invalid, under existing standards.

So Kodak invested $600 million, relying on these expert opinions. Well, by the time the product came out, the Court of Appeals for the Federal Circuit had lowered the patent standard, and suddenly patents that looked invalid when Kodak made its investment were now valid. Once you count the damages levied against Kodak, their loss was over a billion dollars, just because the legal standard changed.

Q Can a company protect itself against something like that?

A There are cycles of high and low protection for each form of intellectual property. In the book, I identify the dynamics that indicate where on these cycles we are today with each area of law and what companies can expect to happen.

For example, patents were on a huge upswing starting in 1980s through the end of the century. Now the pendulum is swinging in the opposite direction.

Q Where else are we in this cycle?

A Trademark is in a long-term upswing. It has, over a 100-year period, expanded from a narrow remedy aimed at protecting consumers from confusion to a robust property right. Look at the polo player on the Ralph Lauren shirt, or the name Calvin Klein - these names and brands have taken on a value of their own, almost like a product or a song.

That's been a huge expansion of trademark, and there's no sign it's going to slow down.

Copyright, on the other hand, is in a more modest way encountering the same cutbacks as patents, most notably in the courts.

One thesis of the book is that these changes occur because of public sentiment. In 1998 Congress extended the term of copyright by 20 years. It was a move of no great prospective economic consequence. But it served as a lightning rod in this country for people who said this was a greedy move to monopolize the public domain. As a result, you'll find courts today carving out exceptions to copyright to a degree that we've never seen before.

House Bill Would Create Govt. Copyright Czar - News and Analysis by PC Magazine

From PC Magazine comes House Bill Would Create Govt. Copyright Czar:

Several members from both sides of the aisle – including Chairman John Conyers of Michigan and ranking member Lamar Smith of Texas – on Tuesday introduced a bill, H.R. 4279, that would further crack down on intellectual property violations, and create several new government positions with the power to enforce the new law."

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Specifically, the bill calls for strengthening the civil and criminal laws relating to copyright and trademark infringement. It would also create an intellectual property enforcement representative who would report to the White House, and establish a permanent intellectual property division within the Department of Justice. Intellectual property officers would also be granted the authority to work with international authorities for anti-piracy efforts.

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A provision in the bill allows the government to seize "any property used, or intended to be used, to commit or facilitate the commission of a violation … that is owned or predominantly controlled by the violator or by a person conspiring with or aiding and abetting the violator in committing the violation."

Those are the highlights. The article contains pro and con positions on the proposed law. I think protecting my client's trademarks important but I see the results of the RIAA litigation and think trademarks are about to go down the same route.

For the lawyers in the crowd: An Idea to Help Start Ups

Ah, the things found when we google!

Such as this press release from 2005: New Intellectual Property and Business Formation Clinic to offer a variety of legal services to the St. Louis community.

From helping start-up companies grow into strong businesses to guiding inventors as they obtain patents, students in the Washington University School of Law's new Intellectual Property and Business Formation Legal Clinic, working under the supervision of experienced intellectual property law attorneys, will offer a variety of services to the University and St. Louis community.

Okay, I have not gone completely off the rails. Bear with me for a moment. This legal clinic continues its existence at Washington University. The school has a web page for the clinic: Intellectual Property and Business Formation Legal Clinic. (The University of Maryland School of Law has a similar project: Maryland Intellectual Property Legal Resource Center).

All well and good - for law schools which can forgo profit making. Why should the private bar take an interest? Because this reminded me of something I read awhile back at the Arborlaw blog, Ann Arbor, Michigan ranks #1 in 2007 for knowledge workers where it was announced that the local firms in Ann Arbor would provide "...free company startup services to downsized Pfizerites, and I have decided to do this as well. Arborlaw will provide free incorporation or LLC formation for qualifying former employees of Pfizer who become entrepreneurs and start a new technology-based business in the Ann Arbor area." Arborlaw then published details on this program in Arborlaw to Grant Free Startup Legal Services to Pfizer Ex-Employees.

Now what if lawyers or county bar associations expand the Ann Arbor idea to include basic intellectual property for a reduced fee? Criteria for such help needs development but I think Ann Arbor provides a guiding light for those criteria.

The Washington Post on Companies Protecting Their Domain Names

Two types need to read Firms Fight Back in Site Name Game, those starting businesses and those businesses who have taken no steps to protect their online image.

"Shielding a company's brand from early or negative exposure has become a business unto itself. On the advice of digital brand-management services and lawyers, many companies register thousands of names to protect themselves. Every time they launch products or services, executives have to worry about shielding their moves online from competitors and protecting themselves from users who might sully their brand."

Domain names are a bit more and a bit less than trademarks. You also need to think about cyber-squatting.

Copyright Law of the United States

The U.S. Copyright Office has the Copyright Law of the United States online. HTML format and all that.

Fashion Apparel Law

Fashion apparel has not been a major issue in my practice but I got to say I like Fashion Legal Issues from the Sheppard Mullin Law Firm and Faking It: What Designers Should Know About Piracy, Purse Parties, and Parking Lots touches on an interest of mine - copyright law.

"Piracy is not just a problem on the high seas or the internet: fashion designers have fallen victim, too. Current copyright laws protect only the artwork of a design, such as labels, logos, prints and embroidery. Leave off the label or change the logo slightly, and manufacturers and copy-cat designers have free reign to duplicate the cut, shape, style, and silhouette of an item of clothing or an accessory. This widespread practice of design piracy by popular retailers is legal…for now."