High-Tech Entrepreneurship

Patents
Ren-Song Tsay
Session 11

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 Taiwan: Fastest-growing U.S.
Patent Holders
Among the technology companies with more
than 50 U.S. patent awards in 2004,
according to IFI Claims Patent Services,
three Taiwanese companies ranked
among the top 10 performers in
percentage gains over their 2003 patent
totals: DRAM maker Nanya Technology,
chip set specialist Via Technologies and
LCD manufacturer AU Optronics.
(EE Times, 05/18/2005)

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 Importance of Patent Rights
付給國外大廠高額權利金，一直是台灣高
科技代工廠商心中的痛。
聯電，最高一年甚至要付出高達新台幣三
十億元的權利金。
郭台銘用「專利地雷網」獨霸市場
( 商業周刊 2/22/05)

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 Mistakes of Xerox PARC
Did not patent inventions such as
the computer mouse and
the graphic user interface

Resulted in other companies such as

Logitech and
Apple Computer, Inc.
without payments to Xerox.

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 Integrated IP Strategy
Hire seasoned counsel
Use different forms of IP to support
business strategy.
Review strategy annually
 continues to support evolving business
strategy.

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 Patent Protection
Effective for 17 years in US
Permit to “exclude” others from making,
using, selling, offering for sale, and
importing a product or service embodying
the invention.
Example: Polaroid stopped Eastman
Kodak from making instant cameras and
collected over $900 million in damages.

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 Resources
US Patent Office web site
 http://www.uspto.gov/

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 Copyrights
Protect “original” works of authorship which are
“fixed” in a tangible medium of expression.
Traditional works: songs, novels and motion
pictures.
Technology products: manuals, firmware and
computer software
Term for company copyrights

95 years after the date of first publication or
 120 years after creation

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 Copyrights
Arise automatically when a work is created
No need for application to the government
However, a US company needs to
“register” the copyright prior to bringing a
court action for infringement

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 Copyright law
Exclusive right for the owner to
 reproduce,
 distribute,
 modify,

publicly perform and
 publicly display the work.
But it does not protect the idea behind a
work

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 Power of Copyrights
The record companies and music
publishers shut down MP3.com’s
My.MP3.com service and received over
$160M for copyright infringement.
The record companies shut down Napster.

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 Trademarks
Words, names, symbols, slogans, smells, sounds or
devices used by manufacturers of goods or providers of
services to identify their goods and services.
Examples:
 the bitten apple logo for computers,

the word “Google” for Internet searching,

the roar of the MGM lion for films, and

the three-dimensional design of the Coca Cola bottle for soft
drinks.

“Intel Inside” campaign
Endure forever as long as they are continuously used.

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 US Trademark Rights
Arise through use but limited to the
geographic area used.
Federal trademark registration provides
 the presumption of rights throughout the
United States and
 permits the ability to file and obtain future
protection of the trademark prior to use.

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Trademark: No Confusing Similarity
For example, Apple was able to prevent the use
of the trademark Pineapple on Apple-compatible
products.
No protection of “generic” term
 For example, “CAM” would not be protectable for
computer aided manufacturing software.
 For startups, their trademark may become the general
name for a new type of product and, thus,
unprotectable: Google is facing that risk as “googling”
becomes a general term for Internet searching

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 Trade Secrets
Information of any type that is valuable to
its owner because it is not generally
known in the industry and its owner has
taken reasonable steps to maintain the
information in confidence.
Examples of trade secrets include

customer lists,

source code, and

semiconductor manufacturing processes.

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 Trade Secrets
Arise automatically if a company takes the
appropriate steps;
They continue to be enforceable so long
as they meet those criteria.
Most famous example: the formula for
Coca Cola.

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 Trade Secrete Protection
Limited: it prevents the “misappropriation”,
or “wrongful” taking, of the trade secret
What is unlawful: take confidential
information and start a new company
What is lawful: reverse engineering,
unless breaches an agreement
Protect your trade secrets with NDAs and
process

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 Common IP Mistakes by Startups
Failure to Secure Ownership (or License) of IP Rights

Obtain proper written assignments of IP rights that are
developed by the founders prior to the startup’s incorporation
developed either by employees or consultants after the startup’s
incorporation.
Missing Opportunities for Patent Protection

File before public disclosure of the invention
Poor Trademark Selection
Errors in Licensing
 Narrow inbound license limits future product evolution


Exclusive rights to 3rd party: Apple to Windows
Use of Trade Secrets or other Material from a Prior Employer
Use of Open Source Software in Product Development
 It requires open your source code: Cisco + Linksys

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 Subtle IP problems
The wording of a license grant resulted in
Apple Computer, Inc. losing the right to
prevent Microsoft Corporation from
creating a Mac-like graphic user interface
in its Windows products.

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 Investor “Due Diligence” Report
Prepared by experienced attorneys,
Ideally prior to soliciting funding.
Includes
 a review of assignments,
 patents,
 trademarks,
 inbound licenses and
 outbound licenses.
Not just IPs owned by the startup, but also the
patent rights of competitors to ensure that a third
party does not own rights which would block the
product or service of the startup.
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 Patent Strategy
Build a process for identifying potentially patentable
inventions.
 tradeoff between patent and trade secret protection
 review the patent portfolios of competitors

focus on “chokepoint” inventions and limit competitors

patenting both the product and the method of manufacture.
Decide which countries to patent
Do it before public disclosure
Disclose invention intentionally to prevent other party
from patenting it
Participate in standard bodies if appropriate

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 Copyright Strategy
Ensure appropriate transfers of copyrights
developed by employees and independent
contractors.
Register the copyright of the most
important products
Avoid unauthorized use of third party
software, manuals or other copyrightable
materials.

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 Licensing Strategy
Carefully review inbound licenses
 Sufficiently broad to cover future product development
 Subleasing rights?
 Transferable in the case of a merger or asset sale.
Clearly define “exclusive licenses” coverage so
can exploit others markets
Carefully consider acceptable liability through
warranties and IP indemnities to its clients.
Establish a policy for the use of open source
software

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 Confidentiality
Prevent competitors get hold of your valuable
business ideas.
Print “Confidential” on each page and treat your
business plan a trade secrete.
You should ask Nondisclosure Agreement
(NDA), but do not expect everyone will sign it.
Suggest not to include in a business plan the
most sensitive market or technical information.

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