Posted by Barlow Keener

For this post on IMS and FMC developers’ intellectual property, I collaborated with my friend, Michael Dowd, a partner at Foley, Hoag, LLP, in Boston.  I provide counsel on licensing patents and trademarks, and Michael’s practice involves developing patenting strategies and resolving inventorship issues, software licensing disputes and trade secret misappropriation claims.  As we explain below, these are intellectual property issues that reponsible developers, especially those IMS and FMC developers outside the U.S. seeking to sell into the U.S. market, should spend time and resources on before launching their products.

Companies developing applications and appliances in the new triple-play IMS (IP Multimedia Subsystem), the FMC (Fixed Mobile Convergence), or as members of the IMTC (Interactive Media Telecommunications Consortium) face intellectual property decisions and challenges with regard to new developments.  Among the important decisions will be whether to protect the company’s intellectual property as trade secrets or through patenting.  This intellectual property decision tree exercise can and should be planned for in advance of development.   

In order to build a solid intellectual property asset and to protect the developer against attack by other creators of similar technology, decisions will be required to be made regarding technology advancements.   These decisions will vary from country to country.  For example, in the U.S., business processes may be protected with a patent where the same business process would not be protected in Europe.    

The following are five considerations to keep in mind when determining how best to protect new ideas created by the developer.   Decisions will also need to be made in light of the financial depth of the company.

1.   Financial Considerations.   Well-financed companies may wish to file for patents for even minor innovations.  Even if an experienced engineer or software designer initially deems them “obvious,” incremental improvements are often patentable.  Smaller, or “garage-based” developers will not have the budget to patent every concept or idea and will choose a different approach, such as maintaining the innovation as a trade secret.

2.   Patents: Consider the Disadvantages.  Even if there are sufficient funds in the bank to file patents on various innovations, there may still be reasons to keep them as trade secrets rather than seeking patent protection.  Trade secrets, by definition, keep the innovation from being known or understood by others – assuming the developer is able to keep a lock on the formula.  Patents, on the other hand, reveal the idea to competitors and customers.  When a patent is issued, it is published for the world to see, and even the patent application is generally published 18 months after it is filed.  Part of the price paid by a patent applicant is allowing the public to learn from the teachings of the patent to create new ideas.  This could offer competitors valuable insights into your technology, and it is possible that they or others will be able to use those insights and create a “work around” that does not infringe the patent. 

3.  Trade Secrets:  As Long As There Is A Secret.  Maintaining innovations as trade secrets is a time-honored way of protecting intellectual property.  The formula for Coca-Cola may be the most famous trade secret.  While a company can protect its “secret sauce” indefinitely as a trade secret, unlike the limited lifespan of a patent, the key is maintaining the secrecy.  Once the “cat is out of the bag,” trade secret protection is lost.  Competitors are generally free to reverse engineer your product, and there is always the risk that even careful steps to maintain secrecy could fail to prevent inadvertent or malicious disclosure of the innovation.   

3.  Patents: Tremendous Leverage.  If a company has the budget for filing patents, there are considerable advantages to doing so.  A well crafted patent may be able to cover a broad swath of a business process or the critical element of a new product, and could create a monopoly for the developer lasting nearly 20 years.  A patent can be a powerful offensive and defensive weapon.  Offensively, it can be used to stop competitors from using the invention, or, short of litigation, can help persuade them to enter into a licensing agreement.  On the defensive side, a competitor may be reluctant to sue you for infringing its patents if they face a likely  counterclaim that they infringe your patent.  A mutually advantageous option, where both parties hold relevant patent rights, is entering into cross-licensing agreements.

4.   Patents:  Investors and Customers.  Particularly for an early-stage company, investors are likely to scrutinize its patent portfolios to insure that the company’s intellectual property is adequately protected.  Patents can give investors confidence that the company will be able maintain its competitive advantage, and may also represent a distinct asset valued by investors or others in the field.  Even the filing of a patent application can help investors over the risk-reward hurdle, resulting in investment funding prior to actual sales.  In addition, patents can help to distinguish you from the competition and attract customers with your “patented” technology or business process.   

5.  Patents: Business Processes.  Often a developer will create a business process that is patentable in the U.S. but not in Europe.  The business process patent can be broad and cover the concept of having two or more solutions interacting with each other.   IMS is naturally an area where developers are creating new applications that interact and interface with other applications creating new revenue sources and customer solutions.   
 
Forward-thinking FMC and IMS developers can best protect their innovations by strategizing with U.S. and European intellectual property counsel to examine the benefits and limitations of relying on patents or on trade secret protection.  By way of example, a decision to file for a patent could result in enormous value for the developer, but may ultimately reveal to the competition the developer’s “secret sauce.”  Modest investments in time and resources up-front to develop an intellectual property strategy can result in significant long term benefits.