Global Protection of Technology

          In today's competitive global business environment, your company must be able to acquire and protect technology and market its technology under highly recognizable brand names.  Because of the competitive advantage of technology, there have been increasing activities in industrial espionage, infringement, misappropriation, piracy, counterfeiting and hiring of competitor's employees.  Business losses suffered by U.S. corporations as a result of improper technology losses amount to many billions of dollars annually.

Your company's technology may be protected through two basic modes.  The first method of protecting your technology is to exclude others from using it.  A patent is an agreement with a government whereby the government issues to the patent owner the right for a specific time period to exclude other persons from making, using and/or selling the invention in exchange for the inventor's publication of his or her invention for use by the public after the end of the time period.

          The second approach is to make and maintain it as a trade secret.  Trade secret protection is the antithesis of patent protection.  The basis of a trade secret is that the subject matter is held secret and is not published whereas patents are published.

Patent vs. Trade Secret Protection
          The patent systems in the U.S. and other countries grant the inventor the right to exclude others from making, using and/or selling the invention in exchange for the inventor making a public disclosure or publication of his invention.  This right to exclude others covers a limited number of years.

          The concept of trade secrets is the direct opposite of patents because the invention is not publicly disclosed and there is no time limit on trade secret protection which can be maintained by the inventor.  In the real world, various factors cause the loss of secrecy and the property status of trade secrets.

          Patentable subject matter is limited to any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.   Designs and plants are patentable.  Items which cannot be patented include business and marketing strategies and plans, mathematical formulae, raw ideas, mental concepts and processes, printed matter, naturally occurring articles, principles or laws of nature.  Tangible forms of computer programs, printed matter, works of art, etc. can be protected by copyright, but such protection prohibits only copying per se and does not prohibit the use of the concepts and ideas embodied in the copyrighted works.

Trade Secrets
         State law governs trade secrets law.  States have different definitions of trade secrets.  In 1995, the American Law Institute published the following definition:

        A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.
        All states' definitions include new technology advances as trade secrets.  In the case of a new technological breakthrough involving a product with unique properties, R&D managers and technicians know the specifics of the product and testing results.  Testing, analysis and refinement are normally required before a product can be marketed.  If your company lacks the manpower, equipment, specialized analytical tools to complete this work, outside sources may be retained.  Secrecy of the new product must be maintained in order to protect your company's property rights in the new product.  Outside vendors must not be permitted to gain rights as owners of the technology for the product to be marketed.

          A new technological advance which is unique to your company and has business value may be protected through two basic means or a combination thereof. In a situation entailing the disclosure of trade secrets, a confidential relationship involves an arrangement between the owner of a trade secret and another person.  The understanding is that due to the nature and character of the relationship between the parties and the circumstances, the trade secret owner may disclose the trade secret to the other without concern that the other person will disclose it to other persons or use it for his own benefit to the detriment of the owner.  There is a legally binding obligation on the recipient of the disclosure similar to an attorney-client relationship in which the recipient of the trade secret is under a fiduciary duty to the owner.

          However, there are serious problems with confidential relationships.  It may be troublesome to prove all elements of the relationship because it may not be formalized by a specific agreement or contract.  Rather, it may be inferred from the circumstances and the nature of the relationship.

          You must prove the circumstances establishing a relationship of mutual trust.  In addition, you must establish that you have a fiduciary relationship which is the legal basis to rely on those conditions.  The party receiving the information will undoubtedly attempt to deny that a confidential relationship exists.  Because of these uncertainties, reliance on informal confidential relationships to protect trade secrets is not recommended.

Confidentiality Agreements
      Confidentiality agreements may be written or oral.  The existence of an unwritten agreement as well as the terms and conditions of such an agreement are difficult to establish.  The law pertaining to secrecy agreements involves complicated intellectual property concepts.

Public Domain and Publication
        The terms public domain, publish and publication are significant concepts in secrecy agreements. A trade secret is in the public domain; if it is possessed by a person who does not own part or all of the trade secret or a person who has no proprietary interest without the legal obligation to keep it secret.  The concept of "public domain" relates to whether the other person has a legal right to disclose the trade secret or publish it.  The concepts of "publish" and "publication" deal with the actual publication or disclosure of the trade secret.
   When a trade secret enters the public domain, thereafter, ordinarily it can never be considered a trade secret, whether or not it has been published.  When a trade secret enters the public domain, it loses its status as a property.  However, when a trade secret is published in violation of a secrecy agreement, it does not necessarily lose its status as a property and does not inevitably enter the public domain.  If the facts relating to the publication reveal limited dissemination of the disclosed trade secret, many courts will order the receiving person to maintain it as a secret, thereby preserving the secrecy and the property status of the trade secret.  Courts will seldom preserve the property right if the trade secret owner caused the publication of the trade secret.  In such a case, the owner will be deemed to have placed the trade secret in the public domain, thereby eliminating his proprietary rights.

Evidence and Proof
          Evidence and proof are essential components in establishing and maintaining the proprietary status of trade secret information.  The confidential relationship is very difficult to prove because the evidence is predominantly verbal and because the facts surrounding the relationship may be subject to opposing interpretations by both parties.  Verbal secrecy agreements suffer from similar problems.  The existence of a written agreement is relatively easy to prove and the only real concern relates to the meaning of the terms and conditions.  Accordingly, a clearly written and detailed agreement containing all material terms and conditions is invaluable.

Secrecy Agreement
          The agreement should be written by an experienced attorney.  All significant possibilities should be covered by the agreement.  The language must be sufficiently broad to cover all the reasonable possibilities.  The content of secrecy agreements is a complex subject matter.  Most secrecy agreements in a business environment should provide that if the recipient makes improvements or modifications to the technology disclosed under the secrecy agreement, the new improvements or modifications should be subject to secrecy obligations imposed on the recipient and should be disclosed promptly and in full to the original trade secret owner.  In short, the recipient would not have had the opportunity to make the improvements or modifications, except for the original disclosure.

Advantages of Patents
          In order to ensure protection of trade secrets, employees should sign secrecy agreements when they are hired.  Secrecy agreements signed after employment has commenced may not be enforceable because of the absence of consideration.
          There have been many cases involving the transfer of trade secret technology in the Far East which have produced negative results for trade secret protection.  For example, an Asian company transferred trade secret information to its subsidiary through communication channels.  The technology was transmitted by fax and through the telephone system by satellite dish.  The transmissions were intercepted and recorded by governmental authorities.  A key employee of the company later left to join a competing company.  When the former employer sued for theft of trade secrets, the court held that there were no trade secrets because the former employer had published them unknowingly to the governmental authorities without first getting a secrecy agreement signed.  Once a trade secret has entered the public domain anywhere in the world, it cannot obtain effective legal protection under trade secret laws of most countries.

          Several considerations affect your company's decision to seek patent protection.  The initial question is the likelihood of obtaining patent protection.  Prior inventions should be examined carefully with patent experts.  Your company cannot get a patent for an innovation invented by another person.  In addition, patent protection is not available if the combination of pre-existing published works of others would obviously lead a person skilled in the field to produce the invention.  You should examine indications that would lead the skilled person to believe that the invention could not be produced.  In short, you should make an informed assessment whether the invention can be patented or it is merely an obvious improvement or modification of another person's invention.

          If the preliminary indications are that a patent may be obtained, the inventor must write a detailed description of the invention.  Patent law states that both the invention and the manner of making and using it must be described in writing "… in such full, clear, concise and exact terms as to enable … any person skilled in the art ... to make and use ... [that] … invention."
         The inventor basically needs to prepare a document similar to a cookbook.  The patent application constitutes a detailed report of the invention.  In addition, the write-up will save a substantial amount of legal fees by minimizing the drafting time of the patent attorney and facilitate proof of the date of the invention, the identity of the inventor and the details of the invention as of the date he writes the comprehensive write-up.

          There are many difficulties of maintaining the trade secret status of an invention in a commercial setting for an extended period.  The cost of obtaining patent protection must be weighed against the value of having a relatively long-term exclusive claim to the technology.  If the cost benefit/analysis is positive, a patent application should be pursued promptly.

          A large number of patent applications are filed prematurely.  Many patents do not cover the commercial embodiments of the inventions or the optimized and commercially viable methods of producing those inventions.  Market advantages are obtained only by having exclusive ownership of a patent which covers the product which your customers want to purchase or the method of producing a cost-effective, high-quality product which customers desire.  The application should be based upon a careful assessment of the commercial substance of the invention.

          As soon as the determination has been made regarding the commercial form of the product, prompt patent filing should be made.  The owner's objective is to be the first to file an application covering the invention before any other person creates the same invention and files.  In addition, the longer you wait, there is a greater possibility that your trade secrets will be lost.
          Your marketing directors should decide how and in what form they will they sell the new product.  The characteristics of the product which will be the most desirable and advantageous to your customers should be isolated.  Certain features of the product probably need to be optimized, changed, enhanced and modified to make it attractive to customers.

          Manufacturing officers should determine requirements of producing consistently high-quality products on a commercial scale.  The cost of commercially produced, high quality products need to be ascertained.  Cost reduction measures should be applied.  All practical problems which must be resolved before commencing commercial production should be examined by the inventor.  The inventor should document solutions to any problems.  Otherwise, other persons may be consulted to make product refinements, in which case the original inventor will not be the sole inventor, but rather a co-inventor with the person making refinements. 

          The innovation is the refinement process which goes beyond the invention.  If the original inventor makes the innovation, he may include such as part of his invention.

External Factors
          In short, various unexpected external factors may affect a company's trade secret program.  For example, in certain foreign countries such as Japan, South Korea and Taiwan, confidential relationships do not exist.  In these jurisdictions, there is no distinction between public domain and publication.  Hence, if the information is disclosed either rightfully or wrongfully, the information may no longer be protected.

          Union employees may pose problems.  The issue of employee secrecy agreements may have been the subject of contract negotiations.  Union staff may sign different employee agreements from the office management staff.  A secrecy agreement signed by a staff member when he was originally hired may be nullified when he joined the union.  A union contract may provide that it defines all of the rights and obligations of union members.  The company which signed the union contract may be bound by its terms.

Patent Application Details
          After all testing, analysis and identification work has been completed and the parameters and scope of the product have been carefully documented, a supplemental write-up must be developed for the optimized commercial product and the optimized commercial manufacturing process, i.e., the "innovation".

   After these elements have been completed, the patent attorney should be consulted.  All documents and materials relating to the invention, including all the previously published literature discussing "close-but-different" inventions should be presented to the patent attorney.   The patent application should contain as much detail as possible, including the details of how the invention was tested, analyzed and characterized and the results of this work.  In regard to the optimized invention and the commercialization process for manufacturing it, various permutations and combinations should be reviewed.  All reasonably possible variations of the product should be included in the patent application.

   There are two main reasons for including substantial detail and a broad scope of description in the patent application.  First, the patent attorney will be able  to develop diverse claims covering various features of the invention.  This may be important during prosecution when arguments may be made against "prior art" references cited by the patent examiner.  This also provides the best opportunity to fashion the broadest exclusive position in the particular technology field.  Second, in the event that the optimization of the invention takes a different course than originally anticipated or unforeseen processing techniques are required for commercialization, there will be a stronger likelihood of being able to develop patent claims during the prosecution of the patent application to cover the subsequently recognized aspects of the invention.

   Using a what-if approach during the drafting of a patent application may prove valuable later.  The patent application description cannot be amended by adding new matter after it has been filed.  However, amendments to the claims and new claims can be made, but only to the extent that the changed or added claims are supported by the written description contained in the original filed patent application.

Foreign Patents
          Trade secret and patent protections may be utilized concurrently.  There is a one year time period to file a patent application after publication of an invention.  It is mandatory to have secrecy agreements signed prior to filing a patent application.

          Under the U.S. patent system, for an invention made in the United States, there is a one year grace period to file a patent application after first publication of the invention or after first placing the invention on sale, whichever one year period ends first.  In most foreign countries there is absolutely no grace period.  If you publish your invention prior to the filing date, patent protection will be unavailable.

          In many cases, the foreign counterpart applications are not filed for several months (up to a year) after the United States application is filed.  Under the U.S. patent system, if the invention was made in the United States, and if you pursue a patent program, you are required by law to file the U.S. patent application first and you may not file foreign counterparts until the United States government so permits.

          The Paris Convention, an international treaty, which has been signed by most countries, including most industrialized countries, provides that, if you file your foreign counterparts within one year following your home country filing, each foreign country in which you file will give you a filing date which is the same as the date on which your original home-country application was filed.  This is known as filing under international convention and the filing date is known as the priority date.

          The connection to secrecy agreements is that there is no grace period in foreign countries.  Since the United States filing date is the priority date in foreign countries, the U.S. filing date is the critical date.  If the invention is published before the United States filing date, it is not possible to obtain patent protection in those foreign countries.  Hence, if there is disclosure of the invention without a secrecy agreement prior to the U.S. filing date, it may be possible to obtain patent protection in the United States, but not in most foreign countries.

          There are proposed changes to the U.S. patent system which may eliminate the grace period, thereby placing inventors in the same position as other countries in the world.

Foreign Patents Infringement Litigation
          The majority of foreign countries have patent systems under which the patent application is published before a patent is granted.  Most countries publish approximately 18 months after the filing date.  This differs fundamentally from the United States system where patent applications are kept secret by the patent office until a patent is actually issued.  Hence, in the United States, no one can be guilty of patent infringement until the patent is issued.  In some foreign countries that publish patent applications, a "guilty" party may be held to have been infringing from the date of first publication of the patent application, provided the patent is ultimately granted.

          The reason for publishing applications before a patent is granted is to allow concerned parties to file oppositions to the grant of a patent.  In the future, the U.S. patent system may be changed to include similar publication and opposition procedures.

          The Japanese patent system publishes patent applications before they are granted.  In Japan, a person may be guilty of infringement from the day the application is first published.  A patent infringement action can be filed in Japan against an infringer even before the patent is granted, after the examination has been completed.  This is not possible in the United States.

          Because Japan has an opposition system established in its patent office, similar to several other foreign countries, the primary issue considered by the court is the factual issue of whether or not there is infringement.  On the other hand, U.S. infringement litigation is complicated because of the question of the validity of the patent.

          Patent litigation in Japan and many other countries varies substantially from the U.S.  In Japan, Germany and France, there is no trial with live witnesses.  Rather, there are a hearings held every two to three months in which attorneys appear before a three-judge panel.  At these hearings, only documented evidence can be submitted by the parties, together with the attorneys' arguments.  At the end of each hearing, the judges state which issues remain open and which issues need further evidence from the parties at a subsequent hearing.  The court may appoint an independent expert to submit a report or in rare cases provide live testimony.  After two or three years, the judges make a formal announcement that the hearings are completed.  Finally, within another four to six months, a written decision is issued.

Where To File Foreign Patent Applications
          Foreign filing of patent applications and payments of the annual costs to keep them active and in force is expensive.  These expenses are a major determinant of which countries foreign filings should be made.  It is important to understand the definition of infringement.  Any person who makes or uses or sells a patented invention is guilty of infringement.

          For obvious reasons, a patent owner is unlikely to bring proceedings against a customer or a prospective customer.  It is important to focus on the infringing competitive activity.  The patent owner should probably focus on where competitors do their infringing manufacturing.  It make be most effective to bring action against an infringing competitor where it manufactures, rather than where it sells the product.  A key question is whether the patent owner can obtain an injunction in the country to stop infringing manufacturing.

          If the patent owner obtains an injunction, the infringer may decide to simply start manufacturing in another country, unless the cost of re-establishing a manufacturing operation is too high.  If production is labor intensive not capital intensive, the competitor may seek to re-establish in a country with cheap labor.  Instead of suing customers, a more appropriate solution may be to advise your customers that injunctions will be sought against the infringing competitors.  By convincing the customers that injunctions will be obtained against infringers, the customers would avoid disrupted sources of supply by purchasing from your company as the rightful patent owner.

Enforcement of Intellectual Property Rights
         Enforcement of intellectual property rights is essential.  After developing technological intellectual property rights, there are various methods of preventing others from misappropriating the property.

          The most important aspect of enforcing technology rights is the development of secure intellectual property rights from the commencement.  There have been many cases in which a company asserted its patent rights against a competitor, but failed because the rights were not perfected.  The owner of invalid patent may even be pursued by the competitor for violation of antitrust laws because the plaintiff should have known that he had defective rights and therefore lacked a legal monopoly.  If a patent is held invalid, the owner may be liable for antitrust damage awards because it asserted an illegal monopoly. 

          In some cases, your company may discover that one of its competitors has commenced production and sales of a successful product.  In addition, the competitor may be awarded a patent on the product.  There are several approaches which you may adopt in this case.  First, you may request the patent attorney to determine a means of invalidating the competitor's patent or to circumvent it.  However, if there is no way to dispute the patent or no effective way to circumnavigate the broad claims, an alternative may be to contact the competitor and seek a license of the technology, which the competitor may or may not choose to grant.  If a license cannot be obtained, your only recourse may be to attempt to independently develop a competing and non-infringing product.

Competitor Awareness
          After obtaining a patent, the owner should deliver a copy of the patent to each competitor, together with a cover letter to its president notifying the competitor of the patent issuance and advising that a copy of the patent is enclosed for its information and review in order to avoid future misunderstandings.  It is inadvisable to accuse the competitor of infringement.  If the owner brings an infringement action, the owner must prove the competitor had actual notice of the patent.  The owner may be able to collect up to treble damages if the competitor had actual knowledge, but subsequently infringed.  If the patent owner accuses the competitor of infringement, the competitor may file a declaratory judgment action against your company to invalidate your patent, perhaps in a Federal District Court which is distant from your location, thus making it extremely inconvenient and costly to deal with the lawsuit.

Internal Company Awareness & Customer and Scientific Awareness
          All of your marketing and sales personnel should be informed that the patent has been granted.  Each person should receive a copy of the patent.  These staff may serve as your watchdogs.  The more knowledgeable they are regarding the patent, the more sensitive your customers will become and the more feedback you will receive in the marketplace. Sales personnel should always obtain samples of suspected infringing products where available.  After obtaining samples, they should be promptly tested and evaluated in regard to infringement and pursued with the patent attorney as appropriate.     All R & D personnel, scientists and manufacturing people should promote the patent at conferences, seminars, trade shows and conventions.  The greater the awareness there is of the patent, the less possibility that there will be an unwitting infringer.

Inventor Publications & Press Releases
         The inventor should be encouraged to publish and make presentations as often as possible about his patented invention and about the patent.  Trade journals should be encouraged to publish articles about the patent.  Press releases should be issued on both the invention and the patent.

         Should you discover that, despite all your protective efforts, a competitor is infringing, the patent attorney should be consulted immediately.  Careful handling is required thereafter because improper actions or communications could place you at a serious legal disadvantage in your claims against an infringer.  Litigation and its ramifications should be weighed because litigation is the last step in enforcement actions.  The specter of litigation and its consequences provide the threat that makes all other policing activities effective.  If you discover infringement, you must take some action.  If you fail to take any action, as the patent owner, you will be deemed to have implicitly granted the infringer a license to practice your patent.  An implied license is a significant factor which the court will recognize and enforce against you.

Enforcing Your Technology
          Searching for infringement and enforcing your company's intellectual property rights requires constant vigilance by your company.  This requires continual communication to develop broad awareness.  Awareness is the best mechanism to abate infringement before it commences.  It is easier for your competitors to initially decide not to infringe your technology than it is for them to cease ongoing infringement in which they have invested substantial time and financial resources.  Of course, the fundamental requirement is that you have fully perfected your company's rights in its technology.

          The most effective enforcement measure is to comprehensively establish intellectual property rights from the outset.  Your company can integrate the differing techniques of patents and trade secrets into a systematic approach of protecting technology in the U.S. and other countries.          

          This brief synopsis highlights certain requirements in the protection of technology.  The outline reviews common issues which should be considered and an approach to considering such concerns.  It is definitely essential to consult a qualified patent attorney to obtain specific guidance and direction.  In order to be effective, the attorney must be intimately familiar with both your business and your technology.  Protecting your technology is a elaborate program which must be coordinated by your company and its legal advisors.