© Haynes and Boone, © Haynes and Boone, 2001 2001 GLOBALIZATION: Leveraging the Internet & I. P. to Competitive Advantage GLOBALIZATION: Leveraging the

© Haynes and Boone, © Haynes and Boone, 2001 2001© Haynes and Boone, 2001

GLOBALIZATION:Leveraging the Internet & I. P. to Competitive Advantage

GLOBALIZATION:Leveraging the Internet & I. P. to Competitive Advantage

By: Dick Thurston

Haynes and Boone, LLP

UTD School of Business

March 30, 2001

By: Dick Thurston

Haynes and Boone, LLP

UTD School of Business

March 30, 2001


Challenges of Global e-commercialization

E-commerce sales are expected to E-commerce sales are expected to exceed $200 billion this year, and reach exceed $200 billion this year, and reach $1.3 trillion by 2003.$1.3 trillion by 2003.By 2006, e-commerce may make up By 2006, e-commerce may make up 40% of all US business40% of all US business““Within 5 years, ALL companies will Within 5 years, ALL companies will be internet companies.” (Andrew be internet companies.” (Andrew Grove, chairman of Intel Corporation)Grove, chairman of Intel Corporation)



TrendsTrends

Globalization Telecommunications Convergence Increased role of non-US companies Strengthening of IP rights

Result -- Competition dictates that every company adopt e-commerce/I.P. strategies, which, unfortunately, expose them to increased liability from foreign laws and regulations



Overview of IssuesOverview of Issues

•IP Overview

•Jurisdiction

• Privacy

• Export Controls

• Do’s and Don’ts



Trade Secrets•Distinguishing Features of Trade Secrets

•Cover Ideas and their expression;•Cover wide range of subject matter;•Remain non-public/undisclosed;•No requirement for originality;•In U.S. - state laws as well as federal law;•Offer potential unlimited life;•Require restriction on access/dissemination - “need to know”•Require protection by owner’s action.



TRADE SECRETSEXAMPLES

Chemical FormulasManufacturing ProcessesMachine DesignsPlant DesignsCustomer/supplier listsFinancial DataFood recipes



TRADE SECRETSPROTECTION

•Employee/consultant agreements•Policies•Restricted access/security - measures•Labeling•NDA’s/Confidentiality Agreements



COPYRIGHT LAW

“Copyright is the Cinderella of the law. Her rich old sisters, Franchises and Patents, long crowded her into the chimney corner. Suddenly, the Fairy Godmother, Invention, endowed her with mechanical and electrical devices as magical as the pumpkin coach and the mice footmen. Now she whirls through the mad mazes of a glamorous ball.”

Zachariah Chafee “Reflections on the Law of Copyright”



COPYRIGHT

•IDEAS ARE NOT protected (ideas are part of public entitlement)..•The law protects the original expression of ideas - fixed in tangible medium (as refined in digital age).•In most countries - copyright exists from the moment of creation (in some countries - may depend on registration•Should affix copyright notice (©).



COPYRIGHT

Examples:

•literature•music;•dramas•sound recordings;•pantomimes and choreography;•pictures, graphs, sculpture;•motion pictures, audio visuals;•software (in some countries);



COPYRIGHT

Owner’s right to exclude others from:

•Making copies; •Preparing derivative works;•Distributing copies (sell, license, lease); •Performing and displaying the copyrighted work publicly.

Copyright Infringement: Exact copying; access and substantial similarities; fair use (commercial vs. non-profit, educational, effect on market value).



TRADEMARKS

Trademarks identify the origin or source of products or services. Buyers can then be confident that the item they select comes from the owner of the mark. Property rights are obtained by use. Registration gives enhanced property rights (™, ®).

Value - is established overtime as buying public begins to recognize mark’s association with the company.



TRADEMARKS

Trademark license:

acknowledge ownership (especially if foreign distributor)register trademarks & domain names in foreign countriesreview & approve marketing materials



PATENTS

What are they?

•Exclusive property rights granted by a government in return for disclosure of the invention) (utility and design);•Property rights allow exclusion of others from making, using or selling the claimed invention;•Term of 20 years from filing;•U.S. is first to invent country, most others are “first to file.”•One year grace period from date of public disclosure;•Application contains detailed description - claims;•Must be: patentable subject matter; have utility; novelty; and non-obvious.



PATENTS

Process:Complete patent disclosure form;•create drawings, written description and claims and send to PTO (or, availability of Provisional application);•Examiner searches related art - accepts or rejects claims;•Amend claims and present reasons for patentability;•Allowance - pay fee and patent issues;•Filing of ROW applications/ PCT filing.

•Enforcement: offer license to infringers; sue in (U.S.) District court (prove infringement, defend against attack on validity; reasonable royalty; injunction).



PATENTS

Why Get Patents:

•Receive royalties from licenses (profits; return on R&D investments; level playing field, etc.);•Cross-license patents (offset value of competitor’s patents; acquire access to other technologies);•Protect important markets;•protect freedom to manufacture;•Acquire assets;•Obtain seed, first round or subsequent equity investment;


Most businesses deploying internet/e-commerce technologies will likely transact international activities, and therefore, risk transgressing laws/regulations unknowingly, which may be actionable.

Funding, tech transfers, etc. from international resources also increases your int’l contacts and exposures to int’l laws, regulations, nuances and risks.


Several of many new age legal challenges:

Electronic and Digital Signatures;Encryption and export controls;Point and click contracts;Media law issuesJurisdiction;Invasion of Privacy;Anti-competitive practices;Protecting intellectual assets;International taxation of e-commerce activities


Encryption.Protects confidentiality/proprietary nature of transmitted documentation - protect trade secrets, personal documents and records.

Taking a "plain text"(human readable) communication through a computer program which translates the communication into unreadable cybertext by employing one or more algorithms and a "key". The cybertext is transmitted to another computer wherein decryption retranslates the communication back into plaintext by using another compatible key. See, the National Research Council’s National Cryptology Policy at:

www.whitehouse.gov/WH/New/Commerce/read.html

But, DOC controls the export of non-military encryption products (“EAA” & “EAR”).

December 1966 interim ruling (61 Fed. Reg. 68572 (12/30/66), requiring a license for the export of all encryption products (15 C.F.R. Pts.740-44). See:www.access.gpo.gov/Nara/cfr/waisidx/15cfr2_99.html


oElectronic and Digital Signatures.

Three kinds of “signatures” in enacted legislation:Digital signatures (limited to pki-based signatures); Electronic signatures (which do not impose security requirements for signatures); and electronic signatures with some authentication requirements (electronic signatures must satisfy certain authentication requirements - uniqueness to sender; verifiable; control; attached to transmitted data).

Digital Signatures. Texas has recognized digital signatures (Texas Bus. & Com. Code Section 2.108): "A written electronic communication sent from within or received in this State in connection with a transaction governed by this chapter is considered signed if a digital signature is transmitted with the communication.” and “…digital signature" means an electronic identifier intended by the person using it to have the same force and effect as the use of a manual signature."

But, most foreign jurisdictions do not recognize digital signatures - yet.Most especially as a “writing” in contract disputes.


Global Media Law Issues.Everyone is becoming a publisher when deploying web content.Just like print publishers - may be sued in one thousand ways, such as:

Privacy LawsAdvertising LawsDefamation, slander, libelDisclaimers from employeesSpeech contentLobbying


Antitrust (“anti-competition” statutes in foreign jurisdictions).

Laws prohibiting anti-competitive activities apply to activities and conduct in Cyberspace.

Foreign jurisidictions increasingly apply standards comparable to US.

US laws apply extraterritorially;

Courts attempt to establish “open access” on the internet.

Other Antitrust Issues and Microsoft Case (see additional slides in materials)


Jurisdiction IssuesMay be subject to jurisdiction in every country in which internet is found.

Increased complexity of regulatory environment.Laws of the “consumer” may likely apply.Specific exclusions - especially where intermediary server resides.Always include “solid” governing law clause.Provide for Early Dispute Resolution, Mediation/Conciliation and then arbitration where local laws and courts are suspect

Find neutrality of jurisdictionEnforceability of Awards under NY Convention

Should you provide for interim, injunctive relief?


Basic Do’s and Don’ts

BUSINESSDo Not

Be gratuitous.

Underestimate industrial espionage potential.

Underscope your written documents; while using “plain English” leave no loopholes for I.P. leakage

DoDefine protect your I.P. globally to fullest extent possible.,

Be cautious, guarded.

Be honest, firm but fair, balanced, equitable when dealing with partners, icenses, etc..


Do NotView any project or technologies and underlying I.P. in static terms.

Apply dogmatically your templates, rules and forms.

Avoid short-cuts in conducting due diligence, especially as to government investment packages

DoPlan for contingencies.

Be flexible-create informal processes for working with counterparts..

Ask the proper, politically sensitive questions - to get the correct answer.

Conduct due diligence!.


For Further Information:Dr. Richard L. Thurston, Esq.

Haynes and Boone, LLP1600 North Collins Blvd., Suite 2000

Richardson, Texas 75081Phone: 972-680-7558Fax: 972-680-7551

[email protected]

Documents

© Haynes and Boone, © Haynes and Boone, 2001 2001 GLOBALIZATION: Leveraging the Internet & I. P. to Competitive Advantage GLOBALIZATION: Leveraging the