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Avoiding Trouble by Designing Around It
Client's Business Objective:
The client, a software developer that creates unique software for modeling dynamic systems, wanted to protect its flagship product. That product, used for three-dimensional modeling and simulation, has been a huge commercial success, particularly in the automotive sector.
The Challenge:
An out-of-state competitor had already sued the client in its home state and in a jurisdiction favorable to plaintiffs. Furthermore, the competitor had a previous verdict giving its technology broad protections. We needed to avoid injunctive relief, and had a narrow window of time to come up with a solution.
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What We Did:
Our legal team took note of the competitor’s concession that earlier versions of our client’s product were non-infringing. We worked with the client to develop a revision to the product that was like earlier versions of the product to avoid a possible injunction.
Results:
We were able to develop a “design around” that retained the essential characteristics of the flagship product without any characteristics that could be construed as infringing. No injunction was issued and the client continued selling its product profitably.
Key Takeaways:
It pays to have a legal defense team that has the business experience and technical background necessary to understand the products and company's goals, as well as the creativity essential to devising business solutions that can design around potential liabilities.
Capturing Intellectual Property From Acquired Entities
Client's Business Objective:
The client, a multifaceted Fortune 500 company involved in electronic storage, micro-processing and systems networking, needed to capture intellectual property and know-how from key employees of an acquired company before they exited to other employers. They also needed to take steps to protect the intellectual property.
The Challenge:
The exiting employees understood their system architectures and product lines, as well as how their technologies fit into the systems of our client, but they had little practical motivation to work with us. Furthermore, the acquired company had done little to protect its proprietary technology, and we needed to move quickly.
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What We Did:
We met individually and in groups with the key employees, respecting their professionalism and explaining the legal obligations and rights involved in the transaction. After extensive employee interviews and much patient listening, we identified those technologies and systems most critical to the client by understanding the operations of both the client and the acquired company.
Results:
Within a four-week period, we extracted all of the critical information from the key inventor-developer employees (well before they left the company) and we completed a large number of applications for software/systems patents that would preserve and protect the critical competitive intellectual property advantages at stake.
Key Takeaways:
It helps to have a legal team with experience in identifying, organizing and prioritizing critical systems information. An attorney's ability to understand the company's business and to deal tactfully with those who support is necessary to facilitate sensitive situations.
Securing Patents Involving Devices and Algorithms
Client's Business Objective:
The client, an international manufacturer of medical imaging devices for in utero observations of tissue abnormalities, sought to build out its international patent portfolio with U.S. patent protections.
The Challenge:
The client’s next round of funding was contingent on acquisition of U.S. patents, and there was a narrow window of opportunity to obtain the funding. Furthermore, the law had recently changed making patent procurement more difficult.
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What We Did:
Our legal team brought the inventor and a member of the client's board of directors to the Patent and Trademark Office for a personal explanation about the development of the device. We demonstrated how the inventor combined unique algorithms with imaging technologies to develop a device for predicting which changes in cellular tissue were likely to be cancerous or pre-cancerous. Our team also produced extensive clinical data and peer-reviewed publications to overcome new and higher hurdles to patent allowance.
Results:
The client received a notice of patent allowance within six months, paving the way for another round of funding and expansion into U.S. markets.
Key Takeaways:
Work with patent counsel to carefully study of legal precedents and prepare for meetings with Patent and Trademark Office examiners.
Transactional Valuation Of IP Rights
Client's Business Objective:
The client, shareholders in a start-up company, had signed an agreement to sell the business to a large European entity. They wanted to avoid damaging post-closing adjustments to the purchase price based on allegations of infringement brought by a third party against the acquiring company (and ostensibly related to our clients’ technologies).
The Challenge:
The European entity was much larger, and had great leverage based on the fact that a deal had been consummated which provided for an escrow to cover liabilities that arose after signing and were arguably related to what they purchased.
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What We Did:
Our legal team looked at the relevant law of infringement and determined that the infringement accusations of the third party, to the degree they held merit at all, were based on technologies that the acquiring company had employed prior to acquisition. Furthermore, we laid out the equitable case for fair treatment of the selling shareholders, many of whom had become key employees of the European entity. We also put on the negotiation table an issue relating to a post-closing performance bonus, arguing that the acquiring company should really pay that bonus (it had been withheld) because our client’s product line had substantially produced the post-closing performance desired (within a certain margin of error).
Results:
Exceeding our client's expectations, we were able to capture half of the escrowed amounts (approximately $2 million dollars) and most of the performance bonus (approximately $7 million dollars) for the individual shareholders and the primary shareholder, the venture capital group.
Key Takeaways:
Lawyers who possess business-sense and people skills and understand the company's critical technologies, are most likely to provide the greatest return on investments in legal services.
