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The customer was Microsoft – see this posting by Mark Radcliffe, general counsel of the Open Source Initiative.

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From the NY Times:

The Supreme Court hears arguments Monday in a case about what kind of inventions deserve patents. The businessmen who came up with a method for hedging financial risk in energy trading sued the Patent and Trademark Office after it denied them a patent.

Allowing an abstraction of this kind to be protected would take patent law too far.

***

Patents perform a useful function, promoting innovation by ensuring inventors the right to profit from their creations for a period of time. But overprotection through patents is as dangerous as underprotection. It can stifle competition and infringe on the rights of non-patent holders. Not every bright idea should be protected as a property right.

Read the rest.

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According to Womble Carlyle’s Trade Secrets blog, “Reuters is reporting that Silicon Valley start-up company Spring Design has sued Barnes & Noble and the lawsuit asserts Barnes & Noble misappropriated trade secrets and violated the parties’ non-disclosure agreement when it copied Alex’s features into its recently announced Nook e-book.”

Read the rest.

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Stanford University has found itself not owning all the rights in one of its patents for methods for quantifying HIV in human blood samples. That’s because one of the inventors on the patent, visiting Roche, a partner company of the university, had signed a “Visitor’s Confidentiality Agreement” (VCA).

See Stanford University v. Roche Molecular Systems, Inc., No. 2008-1509, -1510 (Fed. Cir. revised Oct. 1, 2009), especially at pp. 2-3 and pp. 11-12.

The Roche VCA stated that the signer “will assign and do[es] hereby assign to CETUS [Roche's predecessor], my right, title, and interest in each of the ideas, inventions and improvements” that the researcher might devise “as a consequence of” his work at Cetus. (Emphasis added.)

The researcher’s invention-assignment agreement with Stanford, on the other hand, contained only a future commitment in which he “agree[d] to assign” his rights to Stanford at an unspecified future time — and under Stanford’s patent policy, the researcher might never have to assign his rights to the university . (Emphasis added.)

The U.S. Court of Appeals for the Federal Circuit — which is normally the final authority in most all patent cases — held that the Roche assignment trumped the Stanford agreement-to-assign.

• Under the Roche VCA language, the researcher’s rights in the invention were immediately and automatically assigned to Roche at least by the time the patent application was filed.
• The researcher subsequently signed an assignment document, transferring his rights in the invention to Stanford.
• But, according to the appeals court, that document was of no effect — because the researcher had signed the Roche VCA, he had no rights in the invention to transfer.

[Added 2009-10-26:] The Federal Circuit previously held that:

… [W]hether an assignment of patent rights in an agreement such as the one in this case is automatic, requiring no further act on the part of the assignee, or merely a promise to assign depends on the contractual language.

If the contract expressly grants rights in future inventions, no further act [is] required once an invention [comes] into being, and the transfer of title [occurs] by operation of law.

Contracts that merely obligate the inventor to grant rights in the future, by contrast, may vest the promi-see with equitable rights in those inventions once made, but do not by themselves vest legal title to pa-tents on the inventions in the promisee.

DDB Technologies, L.L.C. v. MLB Advanced Media, L.P., No. 07 1211, 517 F.3d 1284, slip op. at 9 (Fed. Cir. 2008) (affirming determination that, if patents in suit were within scope of employment agreement, they would have been automatically assigned to employer by operation of law with no further act required by employer) (citations and internal quotation marks omitted; bold-faced emphasis and extra paragraphing added).

Lesson learned

Be very careful about signing another company’s visitor agreement — there might be more to it than you think.

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If you ever sign a nondisclosure agreement (NDA) to talk about licensing someone’s technology, but then decide to go it alone and develop your own version, you could be setting yourself up for a rough time in court. Stamps.com has been learning this the hard way.

Stamps.com signs an NDA with Kara Technology, but then decides to go it alone

Stamps.com signed an NDA with a company called Kara Technology. The companies discussed the possibility of Stamps.com’s licensing Kara’s technology to allow users to print secured documents, like stamps or airline tickets, at home using preprinted label sheets.

A couple of months later, however, Stamps.com said they weren’t interested in proceeding further with Kara — and then a year after that, brought out its own product.

Kara sues for breach of the NDA

Kara sued for patent infringement and for breach of the NDA. The trial court granted summary judgment in favor of Stamps.com, on grounds that there was no infringement of the patent, and that Kara had waited too long to file suit for breach of the NDA.

Last week, though, a federal appeals court reversed the summary judgment on both counts. See Kara Technology Inc. v. Stamps.com, Inc., Nos. 2009-1027, -1028 (Fed. Cir. Sept. 24, 2009) (reversing and remanding summary judgment).

Concerning the NDA, the appeals court ruled that Kara was entitled to have a jury decide whether Kara waited too long — as well as whether Stamps.com breached the agreement by using its knowledge of Kara’s confidential information in developing its own product.

Cases like this can go badly for the defendant in a jury trial

Now, Stamps.com gets to experience the expense and the management distraction of preparing for a jury trial.

And then, it gets to roll the dice about which witnesses the jurors will believe on these hotly-disputed fact questions.

Doubling the pleasure for Stamps.com, the non-technical jurors — usually the only kind left on the jury after the lawyers have exercised their strikes — may well be biased in favor of a small-company plaintiff like Kara. This is especially true, given that Kara’s lawyers will no doubt wave the company’s U.S. patent around to convince the jury that they are groundbreaking innovators who had their ideas stolen.

And doubling the fun, in American trial practice the plaintiff, in this case Kara, gets to bat first and last: Kara’s lawyers will have the right to go first in presenting their opening statement and to put on their witnesses first, thus creating the jury’s first impression of the case. Then at the conclusion of the trial, Kara’s lawyers will get the last word in the closing arguments.

This kind of case can turn out very badly for the defendant. I have some personal experience on that score: Years ago, I was assistant trial counsel for a big corporate defendant that got hit with a $57 million verdict in a very similar situation. My firm’s client was accused of misappropriating confidential information that it had received under a nondisclosure agreement. The client’s technical people testified that they had developed their technology without using the plaintiff’s confidential information, but the jurors simply didn’t believe them. On appeal, the appellate court held that the jurors weren’t clearly wrong on that point — more precisely, that the record contained substantial evidence, that is, non-trivial evidence, in support of the jury’s verdict — and that was the ball game.

If I had to bet, I’d say Stamps.com likely will decide that discretion is the better part of valor, and will settle before trial.

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A retired University of Tennessee physics professor was sentenced to 48 months in prison for using one Chinese and one Iranian graduate student to work on a research project relating to unmanned aerial vehicles (UAVs); for taking a laptop containing restricted technical data with him on a trip to China; and for having information emailed to him at a Chinese professor’s email account.

This sounds like it was a train wreck.  Apparently, Professor John Reece Roth regarded his research, which was related to a U.S. Air Force contract, as having nonmilitary applications and not being properly subject to the export-controls laws. There seem to have been accusations, though, that he tried to disguise his activities, and continued doing what he was doing even after being warned that it was illegal.  (Remember the old saying that the cover-up is often worse than the crime; recall that Martha Stewart was sent to prison not for insider trading, but for allegedly lying about her trading to federal investigators.)

And it also appears that prosecutors wanted to make an example of the professor.

For more information:

• Knoxville News Sentinel report of sentencing
• U.S. Dept. of Justice press release
• Philosophy of Science blog entry summarizing earlier Associated Press story with additional background information
• Earlier Knoxville News Sentinel article with more background information revealed during the trial
• Wiley Rein LLP summary of earlier phase of the case

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A letter of intent — aka an LOI, sometimes known as a memorandum of understanding or MOU — is the equivalent of comfort food; it’s something you can show your boss to reassure her that the transaction you’re supposed to make happen is moving forward.

The most useful function of a letter of intent, though – arguably its only proper function – is to make it clear that the parties do not intend to enter into a binding contract at that time — that they will do so only through a formal, signed, final written agreement. That makes it more difficult (although not impossible) for one party to claim later that the parties had reached an oral agreement.

ADDED 7/1/09: See Letters of intent: Use with caution!, Weightmans Commercial Property Focus [UK], May 2009 (summarizing case in which court held LOI to be a binding contract, not just a precursor to one).

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A multinational team claims to have qualified for Netflix’s $1 million prize for coming up with an improved algorithm for recommending specific movie rentals to subscribers. The contest is a real bargain for Netflix:  it gets thousands of contestants doing free R&D work for them (not to mention the free publicity associated with the contest), while having to pay the prize money only to the winner (plus smaller annual best-progress prizes).

The contest rules appear to be a useful resource for anyone drafting rules for a similar contest for R&D, marketing, etc.

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Pillsbury Winthrop lawyer Sanjay Jose Mullick writes about laws restricting the possession of encryption technology, and the surprising possible consequences if those laws were to trap a traveler carrying a laptop computer or a smartphone such as the Blackberry or iPhone.

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