The Big Business of Patents & The Patent v. The Trade Secret
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Transcript of The Big Business of Patents & The Patent v. The Trade Secret
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IP For Entrepreneurs September 17, 2013 Liz Wiley, The Wiley Firm PC
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¡ 1836 § US patent number 1
¡ 1911 § US patent number 1,000,000
¡ 16 August 2011
§ US patent number 8,000,000
http://www.uspto.gov/news/Millions_of_Patents.jsp
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The Harvard Business Review estimates $1 trillion in potential revenue is hidden and unrealized in the patent portfolios of companies, universities, and government institutions. Investors and shareholders are demanding greater ROI from the patent portfolio (mostly for struggling companies).
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¡ Internet pioneer ¡ Revenue of over $2 billion per year
§ Down 73% since 2006, when revenues were $7.8 billion
§ Earnings declined from $1.4 billion in 2007 to $13 million in 2011 – with two years of losses totaling over $2 billion in between
¡ After its deal to sell 800 patents to Microsoft for just over a billion dollars, AOL saw its stock price rise by 62%
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¡ Lost market force: slow to react § Forced into bankruptcy after 131 years in business as dominant force
¡ 1,100 patents it deems important (digital imaging), (over)valued at up to $2.6 billion
§ Citigroup provided Kodak with almost a billion dollars in financing
(DIP), secured by all of Kodak’s assets, including its intellectual property
§ Selling these patents would allow Kodak to pay off its debts and gain enough operating cash to fund new businesses
¡ A failure to monetize the patents could force the company to
liquidate, putting its 17,000 employees out of work
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AGAINST
¡ “Patent trolls hold patents and then enforce them when they find evidence suggesting that the patents have been infringed—even though the holder has no intention of making any product using the patent’s contents.”
¡ This practice subverts the
purpose of patents – and intellectual property.
¡ Acts as a “tax” on innovation.
FOR
¡ Patents are assets that have inherent value
¡ Value should be/can be generated by pursuing legal claims in furtherance of that value
¡ Patents are like any other asset that can be financialized (”monetized”) and assembled into a portfolio
http://wallstcheatsheet.com/trading/these-‐big-‐companies-‐invest-‐in-‐patent-‐trolls.html/
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Shortly after his return from England in 1849, Howe inspected some of the new sewing machines that were now on sale and he concluded that they infringed his 1846 patent. Regardless of what other features these new sewing machines may have exhibited, they used…the central elements claimed in Howe’s patent. … Since he was destitute, Howe required an investor to finance his patent infringement lawsuits, and he at last convinced George W. Bliss to invest in his litigation strategy (as well as purchase a one-half interest in Howe‘s patent from a previous financial backer, George Fisher, who had not realized any return on his investment).* At this point, Howe was ready to undertake ― his main preoccupation — indeed, his main occupation—for the next several years: namely, suing the infringers of his patent for royalties.
*In exchange for a partial ownership interest in his 1846 patent, Fisher provided Howe with approximately $2000. … Fisher thus sold his one-half interest to Bliss for approximately $3500.
Adam Mossoff, The Rise and Fall of the First American Patent Thicket: The Sewing Machine War of the 1850s , 53 Ariz. L. Rev. 165, 183 (2009) (emphasis added).
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Texas Trade Secret Law
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¡ What it can be § “[A]ny formula, pattern, device or compilation of information … used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it”
¡ Examples § Customer lists, pricing information, client information, customer preferences, buyer contacts, blueprints, market strategies, drawings, seismic data, in-‐house study on oil and gas reserves
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“It is not possible to state precise criteria for determining the existence of a trade secret. The status of information claimed as a trade secret must be ascertained through a comparative evaluation of all the relevant factors, including the value, secrecy, and definiteness of the information as well as the nature of the defendant's misconduct.” In re Bass, 113 S.W.3d 735, 739 (Tex. 2003) (emphasis added).
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“[T]the party claiming a trade secret should not be required to satisfy all six factors because trade secrets do not fit neatly into each factor every time. We additionally recognize that other circumstances could also be relevant to the trade secret analysis. Thus, we will weigh the factors in the context of the surrounding circumstances to determine whether geological seismic data qualify as trade secrets. In re Bass, 113 S.W.3d 735, 740 (Tex. 2003) (emphasis added).
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¡ Extent to which the information is known outside the company’s business;
¡ Extent to which the information is known by employees and others involved in the business;
¡ Extent of the measures taken to guard the secrecy of the information;
¡ Value of the information to the company and to its competitors;
¡ Amount of effort or money expended developing the information;
¡ Ease or difficulty with which the information could be properly acquired or duplicated by others.
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¡ Effective September 1, 2013 ¡ Broad definition of “trade secret”: a formula, pattern,
compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that: § Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
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¡ Injunctive relief beyond life of trade secret ¡ Damages for actual loss caused by the misappropriation or unjust enrichment
¡ Royalty for unauthorized disclosure or use. ¡ Exemplary (punitive) damages if willful ¡ Attorneys’ fees if willful ¡ Attorneys’ fees available to defendant if claim of trade secret misappropriation made in bad faith
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¡ Slip of paper in a vault somewhere in Atlanta, Georgia listing 17-‐18 ingredients
¡ Only a few corporate executives know the exact recipe; each bound by oath not to reveal contents § When one of these individuals
dies, the others approve a successor
§ The “keepers of the recipe” travel separately to ensure that a single accident won't eliminate all of them
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¡ Harland Sanders used to carry around the secret recipe of "11 herbs and spices" in his car.
¡ Today the recipe lies in an
undisclosed vault in a bank in Louisville, Kentucky.
¡ Only a select handful of
individuals know the exact recipe; each individual is contractually obligated to secrecy.
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¡ No single company is allowed to mix all the ingredients.
¡ The herbs and spices are mixed
by two different companies in two different locations and then combined elsewhere in a third, separate location.
¡ To mix the final formula, a computer processing system is used to blend the mixtures together and ensure that no one outside KFC has the complete recipe.
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¡ Litigation may decide whether is trade secret ¡ Defending and establishing:
§ Confidentiality agreements § Non-‐competes (consult an employment law attorney)
§ Documentation of limited employee access § Not widely known – but ok if public information incorporated into in-‐house market study
§ Proof of actually following in-‐house policies
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Liz Wiley State Bar of Texas Board Certified Civil Appellate Law, Texas State Board of Legal Specialization
The Wiley Firm PC tel. 512.560.3480 | fax 512.551.0028 skype liz.wiley1 [email protected]