Steve McDaniel, Technology Litigators 06.06.13
In the last iPaint, we discussed the egregious and arguably greatest trade secret heist in history, the stealing of Rosalind Franklin’s x-ray diffraction data on the DNA double helix structure – where researchers at one university ripped off a researcher at another university, aided in the heist by a colleague of the victim. It did not speak well of university ethics and certainly brought into question university data protection procedures. Still, it’s hard to protect against an inside job, one with determined thieves and a Nobel hanging in the balance.
Man! I wish I could have represented Dr. Franklin. But, that was long ago (I would love to say “before I was born,” but sadly that would be stretching the truth a bit).
But, I have indeed represented plaintiff universities whose trade secrets have allegedly been stolen, and the battles were ugly. Conversely, I have defended those being sued by universities for allegedly stealing the academic trade secrets, and these skirmishes were messier still. Lots of money was spent, lots of high-dollar lawyers and experts were thrown into the fray, and lots of researchers’ time was gobbled up as witnesses rather than doing the lab work at which they were best. These were typical, down-and-dirty trade secret litigations, indistinguishable from those of commercial entities.
So, I am always amazed when I see from time to time scholarly discussion on whether or not academic institutions can own, maintain and profit from trade secrets. I am equally surprised to hear paint and coatings companies ponder on the advisability of doing research and development at universities for fear of disclosure of the company’s confidential information through perceived “leaky-sieves” of academic laboratories.
Of course, academic institutions are bastions of freedom of exchange of information. It goes without saying that they rush to publish state-of-the-art science and engineering information. They absolutely must seek and obtain public funding to which public funding agencies they owe a duty to produce the information to the advantage of the public at large. And, they must train and matriculate students, graduate students, medical professionals, and post-doctoral fellows armed with the very latest information and techniques.
Just as certain, however, is that academic institutions have trade secrets which they protect as well as or better than most coatings companies. Frankly, they are pretty damned good at it. They have to be. Their very existence depends upon it. They thrive on grants, grants they will not get if the information is public. They attract top-notch faculty by assurances that the intellectual products issuing from these faculty will be commercialized and that there will be dollars to share. They themselves seek to own licensable IP, chiefly in the form of patents but not uncommonly in the form of know-how and show-how. And, if we are smart about doing so, we in the coatings industry can depend upon these academic drivers to protect our own confidential information.
In this short article, I would like to discuss how companies can take advantage of this unending source of economical and excellent research.
Don’t Take IP From the University, Give it To Them
Yep, just give it to them. Your best stuff. Patented or not. Why? Because it’s yours under the law, it will remain yours under the law if shared under appropriate agreements. And, you can prosecute anyone who illegally uses it. Even universities.
Let’s discuss a hypothetical in which PaintCo has developed a novel coating to detect corrosion on the substrate underneath the film. The in-house development used a particular resin system to prove up the concept. PaintCo filed patent applications judiciously in a number of commercially-relevant countries. However, as commercial roll-out was under way, PaintCo discovers problems with the application of the proof-of-concept formulation on certain substrates it had not seen in the initial testing. Commercial launch is imminent, and the marketing boys want to know when (including yesterday) they can put paint on the shelf. The fastest, most efficient, and most likely way to deliver the requisite results is a large team effort by highly skilled formulators and applicators at UniversityX, well-known for solving these very sorts of issues.
A no-cost agreement that licenses to UniversityX the patent, patent application, know-how, show-how and trade secrets surrounding the novel coating for the limited purpose of perfecting the formulation on the problematic substrate is inked. The license requires all improvements to be owned by PaintCo. This is ancillary to the University’s own standard R&D contracts, and PaintCo elects to pay for all right and title to inventions arising from exposure to the University of its IP. And yet, it is a license with all the teeth in it that prohibit disclosure of information. Just like any other license. UniversityX is happy. They get dollars in to support their research organization. There is no need to haggle with them about IP ownership. And, PaintCo meets its roll-out deadlines.
Trust in Your Contracts, Universities Do
Universities are corporations. They generate and sign thousands of contracts per year, to which they are legally bound and upon which they can be sued if they breach. They sign non-disclosure agreements, non-competition agreements, material transfer agreements, license out and license in agreements, research and development agreements, joint development agreements, . . . you name it. Sometimes, they even do these sorts of agreements through a for-profit sister corporation that is not shielded by state immunity from prosecution doctrine. In some instances, you can pay “insurance” in the form of an override on your research and development contract to assure that all technology developed by the university will accrue to the benefit of your company and be protected accordingly. The point here is, if you go into the collaboration with your eyes wide open and make yourself into a good research partner, universities are capable of and quite willing to obligate themselves to iron-clad agreements that will protect your IP.
Develop Close Relationships with PIs, VPs of Research
Like any close collaboration, the agreement that governs the relationship is only as good as the two parties on either side of the signature block. All university agreements should contain tight requirements for routine communications, and back-and-forth revisions to research directions. I have found that very close relationships between the PI on either side of the collaboration are key. Equally as important are C-suite relationships between the VPs of R&D. It helps if they all play golf together (you think I am kidding?).
Hire The Best and The Brightest
One problem area that is perceived by coatings companies is the student turnstile. But, think about it. The same in and out of employees is true of commercial endeavors as well. As we have discussed in iPaint before, non-competition agreements are tough to enforce even against your own high-level employees.
So, plan to hire the brightest of the students that have worked on your projects. They already have training critical to your operation, they have good-standing in the trade community, and it solidifies the relationship between your company and the Pi, the university, and the R&D team generally.
Stay Intimately Involved with the Research
The research product issuing from the contract is yours. If you do not treat it in high regard, why should anyone else? So, stay intimately involved, By this, I mean make sure you are so closely involved that you pick up the nuances, the tricks, the mistakes not to be repeated . . . i.e., the trade secrets, your trade secrets. Be sure and identify them to the teams, and then treat them as you legally must in order to preserve their status as trade secrets.
The take-home-lesson to all this is – figure out where your program needs the most help, identify academic researchers that are demonstrably the best in the area of the problem, and fearlessly join them with your team. They are as fit to handle and co-develop your confidential information as any corporate entity. So long as you take the proper approach from the beginning, you should be just fine.
Man! I wish I could have represented Dr. Franklin. But, that was long ago (I would love to say “before I was born,” but sadly that would be stretching the truth a bit).
But, I have indeed represented plaintiff universities whose trade secrets have allegedly been stolen, and the battles were ugly. Conversely, I have defended those being sued by universities for allegedly stealing the academic trade secrets, and these skirmishes were messier still. Lots of money was spent, lots of high-dollar lawyers and experts were thrown into the fray, and lots of researchers’ time was gobbled up as witnesses rather than doing the lab work at which they were best. These were typical, down-and-dirty trade secret litigations, indistinguishable from those of commercial entities.
So, I am always amazed when I see from time to time scholarly discussion on whether or not academic institutions can own, maintain and profit from trade secrets. I am equally surprised to hear paint and coatings companies ponder on the advisability of doing research and development at universities for fear of disclosure of the company’s confidential information through perceived “leaky-sieves” of academic laboratories.
Of course, academic institutions are bastions of freedom of exchange of information. It goes without saying that they rush to publish state-of-the-art science and engineering information. They absolutely must seek and obtain public funding to which public funding agencies they owe a duty to produce the information to the advantage of the public at large. And, they must train and matriculate students, graduate students, medical professionals, and post-doctoral fellows armed with the very latest information and techniques.
Just as certain, however, is that academic institutions have trade secrets which they protect as well as or better than most coatings companies. Frankly, they are pretty damned good at it. They have to be. Their very existence depends upon it. They thrive on grants, grants they will not get if the information is public. They attract top-notch faculty by assurances that the intellectual products issuing from these faculty will be commercialized and that there will be dollars to share. They themselves seek to own licensable IP, chiefly in the form of patents but not uncommonly in the form of know-how and show-how. And, if we are smart about doing so, we in the coatings industry can depend upon these academic drivers to protect our own confidential information.
In this short article, I would like to discuss how companies can take advantage of this unending source of economical and excellent research.
Don’t Take IP From the University, Give it To Them
Yep, just give it to them. Your best stuff. Patented or not. Why? Because it’s yours under the law, it will remain yours under the law if shared under appropriate agreements. And, you can prosecute anyone who illegally uses it. Even universities.
Let’s discuss a hypothetical in which PaintCo has developed a novel coating to detect corrosion on the substrate underneath the film. The in-house development used a particular resin system to prove up the concept. PaintCo filed patent applications judiciously in a number of commercially-relevant countries. However, as commercial roll-out was under way, PaintCo discovers problems with the application of the proof-of-concept formulation on certain substrates it had not seen in the initial testing. Commercial launch is imminent, and the marketing boys want to know when (including yesterday) they can put paint on the shelf. The fastest, most efficient, and most likely way to deliver the requisite results is a large team effort by highly skilled formulators and applicators at UniversityX, well-known for solving these very sorts of issues.
A no-cost agreement that licenses to UniversityX the patent, patent application, know-how, show-how and trade secrets surrounding the novel coating for the limited purpose of perfecting the formulation on the problematic substrate is inked. The license requires all improvements to be owned by PaintCo. This is ancillary to the University’s own standard R&D contracts, and PaintCo elects to pay for all right and title to inventions arising from exposure to the University of its IP. And yet, it is a license with all the teeth in it that prohibit disclosure of information. Just like any other license. UniversityX is happy. They get dollars in to support their research organization. There is no need to haggle with them about IP ownership. And, PaintCo meets its roll-out deadlines.
Trust in Your Contracts, Universities Do
Universities are corporations. They generate and sign thousands of contracts per year, to which they are legally bound and upon which they can be sued if they breach. They sign non-disclosure agreements, non-competition agreements, material transfer agreements, license out and license in agreements, research and development agreements, joint development agreements, . . . you name it. Sometimes, they even do these sorts of agreements through a for-profit sister corporation that is not shielded by state immunity from prosecution doctrine. In some instances, you can pay “insurance” in the form of an override on your research and development contract to assure that all technology developed by the university will accrue to the benefit of your company and be protected accordingly. The point here is, if you go into the collaboration with your eyes wide open and make yourself into a good research partner, universities are capable of and quite willing to obligate themselves to iron-clad agreements that will protect your IP.
Develop Close Relationships with PIs, VPs of Research
Like any close collaboration, the agreement that governs the relationship is only as good as the two parties on either side of the signature block. All university agreements should contain tight requirements for routine communications, and back-and-forth revisions to research directions. I have found that very close relationships between the PI on either side of the collaboration are key. Equally as important are C-suite relationships between the VPs of R&D. It helps if they all play golf together (you think I am kidding?).
Hire The Best and The Brightest
One problem area that is perceived by coatings companies is the student turnstile. But, think about it. The same in and out of employees is true of commercial endeavors as well. As we have discussed in iPaint before, non-competition agreements are tough to enforce even against your own high-level employees.
So, plan to hire the brightest of the students that have worked on your projects. They already have training critical to your operation, they have good-standing in the trade community, and it solidifies the relationship between your company and the Pi, the university, and the R&D team generally.
Stay Intimately Involved with the Research
The research product issuing from the contract is yours. If you do not treat it in high regard, why should anyone else? So, stay intimately involved, By this, I mean make sure you are so closely involved that you pick up the nuances, the tricks, the mistakes not to be repeated . . . i.e., the trade secrets, your trade secrets. Be sure and identify them to the teams, and then treat them as you legally must in order to preserve their status as trade secrets.
The take-home-lesson to all this is – figure out where your program needs the most help, identify academic researchers that are demonstrably the best in the area of the problem, and fearlessly join them with your team. They are as fit to handle and co-develop your confidential information as any corporate entity. So long as you take the proper approach from the beginning, you should be just fine.
