Play by the rules when using others' ideas

Understand the rights, responsibilities and pitfalls of using others' great ideas.

By Arthur Zatarain, P.E.

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I’m not an attorney, nor do I play one on TV. Yet my engineering career has often involved legal issues, the most interesting of which is intellectual property (IP). Inventors and product developers expect to protect their novel ideas, while others want to freely use what they consider “prior art” from the public domain. Expensive legal sparks can fly when those sides disagree. My recent experience relevant to instrumentation and controls reflects the fertile ground of IP disputes:

  • The simple display of process data from a connected PLC cost several companies many millions in patent licensing fees.
  • A spreadsheet template to record instrument testing spawned a $25 million infringement claim.
  • Flow computing methods used by a service provider were claimed to be stolen trade secrets.
  • Monitoring of equipment cabinet temperature infringed a patent for cooling remote computer systems.
  • Uninterruptible power supplies connected to personal computers infringed a data link patent.

Do these samples of recent IP infringement seem frivolous and perhaps a bit too familiar? They should, as such seemingly ordinary technology likely can be found within 100 yards of your desk. So, the reality is that nearly every industrial facility is a potential candidate for IP disputes over mundane equipment and controls.

When pondering your present and future IP situations, consider these basic questions:

  • What are the common risks of intellectual property?
  • How can potential disputes be minimized?
  • Who will pay the defense and royalty costs if my company ever faces a claim?

What is IP?

Intellectual property generally involves patents, copyrights, trademarks and trade secrets. Each avenue addresses a different aspect of novel ideas that are protected by law. For convenience, this discussion targets patents in an industrial setting. However, every form of IP has similar concerns that deserve equal consideration in any IP initiative.

Some wise person (perhaps me, or maybe Dilbert) noted that “a patent is a good idea.” That seemingly obvious statement reflects far more than mere words suggest: a patent is indeed a good idea, but also one that has been granted a period of sole ownership with the right to charge others for its use.

An often misunderstood IP concept is that an issued patent, no matter how seemingly trivial, is legally enforceable. In a practical sense, the alleged infringer is, therefore, essentially guilty until proven innocent, or until the relevant patent is invalidated through a costly process. Because the cost of IP litigation often is rounded to the nearest million dollars, every instance of IP use — be it intentional or otherwise — deserves advance consideration throughout the process of automation system specification, design, fabrication and ownership.

The legal landscape

Most patents and other IP with easily recognized novelty earn their revenue through undisputed contracts and license agreements. Real value is bought and paid for. But I've also spent time on both sides of legitimate IP disputes that had to work their way through the legal process before reaching an equitable conclusion. In my experience, most IP litigation is productive and far from frivolous. The legal system, therefore, works fairly well for intellectual property — but often at costs that bring a small company to its knees.

Unfortunately, a growing trend exploits not-so-valuable ideas to earn revenue in court rather than at the negotiating table. The technique uses the high cost of a potential defense as leverage to dislodge a relatively low license fee, even for what seems to be a frivolous claim. Therefore, an undisputed settlement is often the path of least resistance. That no-win situation is similar to a “slip and fall” lawsuit, but without the wet floor. Right or wrong, money might change hands without much resistance.

 Figure 1. Intellectual property patent cases had been rising and it might be only the recession that slowed the growth lately.
Figure 1. Intellectual property patent cases had been rising and it might be only the recession that slowed the growth lately. (Source: IP Litigation Clearing House)

There’s been a slight reduction in patent litigation during the recent economic slump (Figure 1). However, that data doesn’t reflect the many infringement disputes that settle without formal litigation. The fewer number of actual lawsuits might reflect only the unwillingness of cash-strapped defendants to fight a costly legal battle. Because IP risk never gets laid off, the revenue from claimed infringement is likely immune from hard economic times.

Three key considerations

The right to use intangible intellectual property is just as important as the right to use the physical material and labor that vendors provide. The production and consumption of IP should, therefore, be addressed adequately in any commercial agreement to clarify the delivery terms going in, and to secure future protection going out.

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