Navigating the IP minefield

Constant innovation and convergence continue to increase technology overlap across products, markets and organizations. With increased overlap, the risk of infringing third-party intellectual property (IP) also intensifies. In this environment, having a comprehensive view of the competitive and IP landscape is vital. This can be extremely challenging without the proper processes and resources, especially since the biggest problem is not knowing what you don't know.

The risks posed by an unknown IP minefield need to be addressed early in the product development cycle. Each stage of the cycle-product concept, product architecture, product design and product manufacture-has its own set of concerns to consider. However, certain types of IP protection are common across all stages, including managing your patent portfolio, protecting your trade secrets and taking precautions when using a third party's IP.

Before beginning product development, have employee agreements in place and be sure employees understand that their obligations are key. While having these agreements in place does not guarantee protection, it does provide a framework that allows everyone to understand their obligations to protect company IP.

As employees move from company to company, they run the risk of IP moving with them. Examples of this abound: Cadence-Avanti-Synopsys, Synopsys-Magma and the latest disputes involving TSMC-SMIC and Microsoft-Google. In the case of Cadence-Avanti-Synopsys, the dispute involved the theft of source code by former Cadence employees to establish Avanti and the subsequent patent infringement relating to the patents covering the code. In the case of Synopsys v. Magma, the dispute is over ownership of patent rights and who is infringing whom. The patents at the center of the dispute are authored by one of the founders of Magma, who is a former Synopsys employee. The issue is whether the idea was conceived while he was an employee of Synopsys or after he had left his employment to start Magma.

In a more recent case, Microsoft vs. Google, the protection of trade secrets is at the center of the dispute. Kai-Fu Lee, a former high-level executive at Microsoft, was hired away by Google. The issue in this case is the confidentiality and noncompete agreement that was in place between Lee and Microsoft and the sensitive trade secrets that he had been exposed to before leaving Microsoft. What will make a difference in this case is whether the trade secrets at issue were actually treated as trade secrets by Microsoft.

In another recent example, TSMC, the Taiwan foundry, accused SMIC, the Shanghai foundry, of recruiting a number of TSMC employees and asking them to bring TSMC technology with them to SMIC. The two parties eventually agreed on a settlement that has SMIC paying TSMC $175 million over six years. In all four cases the common thread is employee movement and ownership of IP. In each case, large sums of money, time and resources were diverted, which could have been otherwise used for future product development.