By Zach Summers, Practical Law
Developing an intellectual property portfolio and protecting valuable information is vital for a company competing in a global environment. Doing so requires keeping up with a flurry of recent developments in IP law. Here are the top ten reasons to update your corporate Intellectual Property and information strategy, especially if you practice within the United States, the European Union or in the United Kingdom:
1. The DTSA Potentially Alters the Patent/Trade Secret Balance
Passed into law on May 11, 2016, the Defend Trade Secrets Act (DTSA) creates a private, federal cause of action for civil trade secret misappropriation. What you need to know:
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The DTSA supplements, but does not preempt, state law trade secret legislation.
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The DTSA has no amount in controversy requirement.
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Claims are subject to a three year statute of limitations from discovery of the violation.
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A trade secret owner can receive injunctive relief and actual damages, as well as exemplary damages and attorneys' fees for willful and malicious misappropriation.
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If injunctive relief is inadequate, the trade secret owner can seek an ex parte seizure order.
- The trade secret owner may secure limited employment restrictions.
The DTSA elevates trade secrets relative to other intellectual property-particularly patents-by providing access to a uniform set of federal standards and remedies. Previously, companies had to decide between revealing information to the public-receiving uniform federal patent protection in return-or keeping patentable information secret while relying on a patchwork of state trade secret laws for protection.
By providing a uniform federal cause of action, the DTSA requires companies to recalibrate how they balance patent protection with trade secret protection. Corporate IP strategy should reflect this new balance. If your company's innovations are resistant to reverse engineering or will be subject to significant patentability challenges, reconsider whether seeking a patent is the best course of action and set corporate IP policy accordingly.
To better familiarize yourself with the provisions of the DTSA, see "Are You Ready for the Defend Trade Secrets Act?".
2. The DTSA Changes How Employers Should Negotiate Employment Agreements
The DTSA protects whistleblowers who disclose trade secrets for the purpose of reporting a suspected violation of law. The DTSA requires that an employer give its employees, contractors, and independent consultants notice of their immunity in any new agreement governing trade secrets or confidential information. Without the required notice, the employer cannot recover exemplary damages or attorneys' fees under the DTSA.
To preserve the right to full recovery under the DTSA, review any affected agreements, including:
- Employment, independent contractor, and consulting agreements.
- Severance agreements.
- Non-compete or non-solicitation agreements.
You can find example notice language here.
Employers should also consider ensuring that forum selection clauses in affected agreements include federal courts.
3. Your Company Is Working More with Independent Contractors and Consultants
The DTSA isn't the only reason to review your company's employment and staffing agreements. Companies are increasingly working with independent contractors and consultants to produce protectable IP. When negotiating the contracts, make sure they include provisions:
- Defining IP deliverables.
- Defining and, if necessary, licensing pre-existing IP.
- Addressing ownership, including work made for hire, assignment of IP rights, and, if applicable any joint IP ownership.
- Seeking indemnification from the contractor for any IP violations.
- Addressing confidential information or trade secrets disclosed under the agreement.
4. Data Breaches Are Increasing
Not all confidential information rises to the level of a trade secret, but that doesn't mean protecting it is unimportant. The personal information of individuals is often a company's core asset and its improper use or handling presents significant risk. You should understand the tangle of laws governing the protection and disclosure of that information and be prepared to deal with any breach. To do so, review applicable federal and state law, including:
- Section 5 of the Federal Trade Commission Act, under which the Federal Trade Commission (FTC) has enforced privacy and security promises and obligations.
- The Gramm-Leach-Bliley Act Safeguards Rule, which requires financial institutions to implement specific safeguards to protect non-public, personal financial information.
- The Fair and Accurate Credit Transactions Act Disposal Rule, which governs disposal of consumer credit report information.
- The Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule, which applies to protected health information.
- The Family Educational Rights and Privacy Act (FERPA), which regulates how schools that receive federal support handle personal information.
- State laws such as data breach laws, general consumer protection laws, and laws that protect specific information such as Social Security numbers, health information, and student data.
Also consider familiarizing yourself with the National Institute of Standards and Technology (NIST) Cybersecurity Framework, which provides voluntary standards for protecting data, and any industry standards relating to your company's particular field.
Understanding your company's legal obligations will help you properly set policy around the use and protection of personal information and promptly respond to any breach. For information on evaluating your company's information security policies to prepare for and respond to breaches, see Expert Question & Answer: Data Breaches-Avoiding Common Mistakes in Data Breach Prevention and Response.
5. The Patent and Trademark Office (PTO) Is Issuing Guidance on the New Patentable Subject Matter Framework
Many companies have come to trust that they can seek patent protection at the PTO for computer- and life-science-implemented inventions. Four recent United States Supreme Court cases addressing patentable subject matter challenge that assumption and establish a new framework rejecting bright-line tests. Recent analysis suggests the PTO has rejected over 36,000 patent applications based on these cases between 2012 and 2016.
Tracking the PTO's guidance on the new framework's application is critical to seeking United States patent protection. Most recently, the PTO published the May 2016 Subject Matter Eligibility Update, which includes a May 4, 2016 Memorandum to the Patent Examining Corps Concerning Subject Matter Eligibility Rejections. The memorandum explains how examiners should both formulate and evaluate a response to a subject matter eligibility rejection.
Providing further guidance:
- On May 6, 2016, the PTO issued an updated set of fact-specific eligibility examples: Index of Eligibility Examples.
- In May and July 2016, in Enfish, LLC v. Microsoft Corp., No. 15-1244, 2016 WL 2756255 (Fed. Cir. May 12, 2016) and Rapid Litigation Management Ltd. v. Cellzdirect, Inc., No. 15-1570, 2016 WL 3606624 (Fed. Cir. Jul. 5, 2016), the Federal Circuit confirmed that it is appropriate to determine whether claims are patent ineligible by comparing them to past claims the Federal Circuit has adjudicated, and found the computer- and life-science implemented claims at issue patentable. The PTO maintains a chart of Federal Circuit opinions on subject matter eligibility: Subject Matter Eligibility Court Decisions.
- On May 19, 2016, the PTO issued a Memorandum to the Patent Examining Corps Concerning Recent Subject Matter Eligibility Decisions addressing recent Federal Circuit cases on computer-implemented inventions.
These PTO materials are not substantive rulemaking, but they provide a valuable insight into the PTO's examination policy. Accordingly, you can use them to determine when to seek patent protection and how to draft claims that the PTO is more likely to accept as patentable.
6. The New Patentable Subject Matter Framework Requires Patent Litigants to Adjust Expectations
The new patent eligibility framework doesn't just affect how and when your company should seek patent protection, but what to expect if your company sues or is sued for patent infringement. Recent analysis suggests that most eligibility challenges have been successful since the new framework was implemented, including 70% of district court challenges and 38 of 40 Federal Circuit cases.
Given these numbers, in evaluating your IP policy, consider:
- Evaluating a jurisdiction's recent patent eligibility decisions before filing suit.
- Making an early subject matter eligibility challenge a prominent part of your defensive litigation toolkit.
- Reevaluating the strength of your company's portfolio should the need for patent assertion arise.
- Protecting computer- and life-science-implemented inventions through trade secret law.
7. The Patent Trial and Appeal Board (PTAB) Is a Dangerous Place for Patents, for Better or Worse
The new patentable subject matter framework isn't the only new development troubling patent owners. The PTAB is a new division of the PTO that handles challenges to issued patents. From its creation in 2012 through June 2016, petitioners filed 5026 petitions challenging issued patents, including over 1000 so far in 2016.
Accused infringers are using the PTAB so much because they are winning. Of the 5026 petitions received so far, a PTAB study indicates the PTAB had completed 3114 petitions by June 2016. Of those, the PTAB instituted a proceeding on 63% of petitions that did not settle before the institution decision, and in 85% of all completed trials the PTAB found either all (71%) or some (14%) of the claims invalid.
In light of these numbers, companies should assume the PTAB will be used as leverage in nearly any assertion scenario. If you are a patent owner, the PTAB has become a significant danger to your portfolio. If you are facing allegations of infringement, the PTAB has become one of your most powerful defensive tools.
8. The Supreme Court and Federal Circuit Have Refused to Defang the PTAB
Given the stunning percentage of PTAB petitions resulting in an unpatentability finding, many patent owners hoped that the Federal Circuit or Supreme Court would reign in the PTAB. To date, those courts have rebuffed nearly every effort to limit the PTAB.
Most recently, in Cuozzo Speed Technologies, LLC v. Lee, 579 U.S. ___, No. 15-446, 2016 WL 3369425 (U.S. June 20, 2016), the Supreme Court considered a patent owner's challenge to the PTAB's standard for interpreting patent claims. Unlike district courts, the PTAB applies the PTO's traditional "broadest reasonable interpretation" (BRI) standard. Many patent owners believe the BRI is unnecessarily broad, allowing the PTAB to consider prior art that would be irrelevant in district court. In Cuozzo, the Court upheld the PTAB's use of the BRI standard.
Given the Supreme Court's Cuozzo decision and the Federal Circuit's consistent support for most PTAB procedures, companies can consider the PTAB's role well-established. Having an IP strategy now means having a plan for the PTAB as it operates today. Understanding the PTAB's unique procedures is a must for companies on either side of a patent assertion.
For more information on PTAB procedures, see PTAB Proceedings Toolkit.
9. The UK's Exit from the EU Requires Monitoring Resolution of Trademark Issues Closely
The UK voted to exit the European Union (EU) in June-though if, when, and how that will happen remains to be seen. In the meantime, companies with a significant EU presence are dealing with an unusual amount of uncertainty about their trademarks. Previously, EU trademark law had been one area where harmonization was successful and provided certainty.
An EU trademark is currently a unitary trademark under one set of European rules. If the UK exits the EU, an EU trademark will no longer have effect in the UK. It is likely (but not certain) that the UK will create an option to convert EU trademarks to national trademarks. If your company has EU trademarks, you will need to monitor how to accomplish this to protect your marks when the UK exits.
10. The UK's Exit from the EU Requires Modifying EU/UK Patent Strategy (Again)
As to the EU/UK patent situation, for most companies with a significant EU presence, a corporate strategy was likely in place for adopting the Unitary Patent and Unified Patent Court (UPC) before the UK's exit. If your company had a strategy, it is time to put it on hold. The UK needed to ratify the UPC for it to come into effect in the EU, and London is currently one of three locations where the UPC was to sit. If the UK does exit, there are a host of issues to address.
Accordingly, the UPC is effectively caught in limbo. In the meantime, European patents will continue to be governed by the European Patent Convention (EPC), as the EPC is not related to the EU. That means that companies will continue to deal with national courts when seeking patent enforcement-a tangle the UPC was intended to resolve.
Region:
European Union, United Kingdom, United States
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