Introduction

To be successful, companies must identify and manage risks in their operations.

Operational risks associated with Intellectual Property (IP) mostly fall into one of two risk categories: (1) loss of the company's IP assets, and (2) liabilities incurred by the company as a result of infringement of 3rd party IP rights.

Failure to manage IP operational risks can result in substantial losses. Listed below, in no particular order, are 10 tips for managing IP operational risks.

My comments below assume all company employees never take confidential information from their employer. (Tip #11 - lock everything down).

1. Implement an Invention Disclosure Program

Generally, IP rights can be lost due to failure to identify and protect the company's IP assets. IP rights can be extinguished if employees of the Company engage in certain prohibited activities before IP protection is sought, such as offering a technology for sale before being on-file at the Patent Office.

An Invention Disclosure Program, preferably in combination with a Publication Approval Process (#6 below), can help avoid most of these losses.

Make an Invention Disclosure form readily available to the company's employees and contractors, and conduct training. Have IT set-up a centralized place for secure submission of Disclosures. Invention Disclosures should receive the highest level of security treatment.

The process of preparing a Disclosure forces submitters to pause and reflect on their work, which sometimes leads to additional discoveries and insights. The Disclosure Program also promotes an employee's visibility within the organization.

2. Implement an Inventor Incentive Program

Encourage employees to participate in identifying and protecting the company's IP assets. Offer employee-inventors additional compensation (stock and/or cash) for assisting in the patent application process.

These Incentive Programs are not complicated. Typically participants receive a first incentive reward when a patent application is filed, and then a second reward (usually half the value of the first reward) when the application matures into a granted patent. I'm not a fan of rewarding employees for submitting Invention Disclosures.

If a company decides not to implement an Incentive Program, then Management should set a clear expectation that, as part of their employment obligations, employees are expected to submit Invention Disclosures for new innovations.

In addition, companies should be aware that some countries such as China and Japan have "remuneration" laws. These laws require companies to pay its employee-inventors additional compensation for inventions.

3. Form an IP Committee

The Committee should be composed of Members from across the organization (technical, manufacturing, sales, etc.). Having 4 Members and 1 Chair seems to work well. Rotate the Committee composition periodically to avoid complacency.

There can be one Committee for the entire company, or several based on product lines, business units, technologies, etc. If there are multiple Committees, have all Committees report to a central Chair for final approval of Committee decisions, and to resolve conflicts between Committees.

4. Have IP Committee meetings - often

I've seen some amazing things come out of IP Committee meetings. IP Committees should meet at least once a quarter. It's not uncommon for the Committee to also meet on a bi-weekly or monthly basis just to go through pending Invention Disclosures.

Committees should not make decisions by consensus - the Committee will get bogged down. The Chair should be the final arbiter of all decisions, based on guidance and input from the Members.

Have the meetings in-person. Invite outside counsel to attend to help facilitate decisions and answer questions.

Here is a sample agenda. Ask outside counsel for help with items d - f.

a. Review Action Items from last Committee meeting

b. Prioritize open Invention Disclosures

c. Approve trademark clearance and filing requests

d. Foreign filing decisions for pending applications

e. Patent maintenance fee (annuity) decisions

f. Review trademark renewals

Send out a set of pre-reads for each Committee meeting. I like to send pre-reads out 2 weeks before the meeting.

Include the following in the pre-reads: (1) copies of Disclosures, applications and patents for which decisions are needed, (2) the decision the Committee needs to make for each case, and (3) the cost for each decision. The 3rd item is really important - patents and trademarks are expensive to obtain and maintain. Outside counsel will be happy to help with cost estimates.

Be careful with how the pre-reads are distributed - these materials should be treated as classified.

Have the Chair report the output of these meetings to the Board.

5. Formulate thresholds for decisions by the Committee (Strategy)

Formulating this policy is not likely a do-it-yourself exercise, but it's necessary and outside counsel can help.

Company Management needs to agree on: (1) when the company should proceed with filing a patent or trademark application, (2) when an application is important enough to file overseas, and (3) when to drop granted patents, registered trademarks, and pending patent applications.

For example, for Invention Disclosures, Management could decide the company will only file patent applications on technologies that have a greater than 50% chance of being independently developed and commercially deployed by a competitor in the next 10 years.

Without advance guidance from Management, Committee decisions will be inconsistent over time. Committee meetings will be chaotic. What will happen is all disclosures will end up as applications, and nothing will ever get dropped.

Revisit this policy often.

6. Implement a Publication Approval Process

Before any written materials go outside the company (marketing materials, white papers, slide decks), the materials should be reviewed and approved for publication.

This policy can save the company a lot of grief by avoiding issues such as inadvertent disclosure of confidential 3rd party information or publication of the company's inventions before a patent application is filed.

The list below is not exhaustive, but here are some things a reviewer might look for.

a. Does the publication contain 3rd party confidential information or copyright protected material? Delete all the Dilbert cartoons.

b. Does the publication contain technical information the company does not want in the public domain, or describe a technology for which a patent application has not been filed yet?

c. Are all marks and copyright notices used correctly?

d. Does the publication contain inaccurate or misleading information?

7. Clear marks before use and seek registrations for marks

Service marks and trademarks are collectively referred to as "marks."

Be sure to have outside counsel "clear" new marks before use. Counsel will conduct a database search of registered and unregistered marks, review the results, and provide a written opinion as to whether use of the proposed mark might be deemed to infringe a 3rd party's trademark rights.

Seek governmental registration for marks adopted for use by the company. Registration can be sought prior to use, or later after use has commenced. Note: a trademark owner's enforcement rights and available damages may be limited if an infringed mark is not already registered with the government.

8. Conduct Patent Infringement Risk Assessments

True or False: a company is free to commercialize technologies described in their own patent filings without any risk of being sued for patent infringement. FALSE.

A Patent Infringement Risk Assessment determines how likely the commercialization of a new technology will result in an accusation of patent infringement by a 3rd party, and what the outcome of that accusation might look like. Is the company likely to be sued and where? Does the company have any defenses?

The new technology may be a new or improved manufacturing process, a new or improved product, or new use of an existing product.

Whether, and when, to conduct a Patent Infringement Risk Assessment depends on too many factors to list here. Often there is no right answer to whether or when to conduct these Assessments. This is a discussion the company needs to have with counsel.

9. Conduct a Buy-Side Due Diligence Analysis

During the process of buying a company, the purchaser will typically conduct a Buy-Side Due Diligence Analysis of the target company's IP portfolio and risks. Likewise, and investor may conduct the same Analysis before participating in a round of funding.

To identify and cleanup any IP issues in advance is, the target company's law firm can conduct the same Due Diligence Analysis that the buyer/investor will perform before closing. Conducting this exercise well in advance of an exit or funding round will allow the target company to avoid any IP issues that could otherwise give the other side cause to walk away from the deal.

Here are examples of a few things the Analysis would examine.

a. Has the company adequately identified and protected its IP?

b. Have all employees signed employment agreements with the appropriate IP terms such as the obligation to assign inventions?

c. Whether on the procurement or sales side, do all the commercial agreements have appropriate IP infringement warranty and indemnity terms?

d. Have all the needed trademark clearances and Patent Infringement Risk Assessments been completed?

10. Conduct Patent Portfolio Gap Assessments - often

Once a patent application is filed, the scope of the description of the invention is fixed, whereas technologies change and evolve.

A Patent Portfolio Gap Assessment compares the company's granted patents and pending patent applications against the current generation of a given technology.

These Assessments are really easy to do and can have a huge impact. The company identifies a small group of technical people to meet with their attorney to look for gaps in protection.

Once my client identifies the target technology to be reviewed, I like to send out copies of all the relevant patents/applications two weeks before the meeting. The meetings can be pretty fluid and informal. I like to start by simply asking what the company is doing different today versus what was is described in the company's patent literature.

You would be amazed how often a patent application is filed, the technology evolves, and no one thinks to go back to get additional patent coverage for the new changes. This Assessment will identify those gaps in the company's patent portfolio.

Disclaimer: This post was prepared by Michael Ross for informational purposes only, and does not constitute legal advice or establish an attorney-client relationship. Readers should discuss their own particular situation with their attorney before taking, or refraining from taking, any action.