Pennsylvania Litigation Blog : Pennsylvania Litigation Lawyer & Attorney : Barley Snyder Law Firm : Serving Lancaster, Reading, York, Chambersburg

 In 2006, the Federal Rules of Civil Procedure were amended to provide specific rules about the discovery of electronically stored information (“ESI”). Among other things, the amendments established rules governing the ESI production format. Discovery in employment discrimination cases frequently becomes bogged down in disputes over whether, and how, ESI will be produced. Attorneys representing employees often seek production of documents in “native format”—i.e. the electronic format in which the document was created. Native format production permits access to a file’s “metadata,” which can sometimes show changes made to a document or file. Employees’ attorneys believe that metadata will reveal “smoking gun” evidence of discriminatory intent. In contrast, employers—even those with nothing to hide—avoid native format production because of the associated expense and hassle. 

In Chapman v. General Board of Pension & Health Benefits of United Methodist Church, a magistrate judge from the U.S. District Court for the Northern District of Illinois explained under what circumstances a party must produce ESI in native format. In that case, Chapman sued her employer when her job was eliminated, claiming disability discrimination under the Americans with Disabilities Act. At the litigation’s outset, Chapman served the employer with discovery requests, but the requests did not indicate in what form responsive documents should be produced. The employer provided responsive documents in paper form, and Chapman did not initially object. 

Chapman, however, hired new counsel, who demanded re-production all of the previously-produced paper records, this time in native electronic format. Although the employer ended up re-producing almost all relevant documents, Chapman took issue with the time and negotiations required. Chapman’s attorneys filed a motion for sanctions accusing the employer of “gamesmanship, bad faith, and sharp practices,” mainly because of the initial refusal to re-produce all previously-produced documents. 

United States Magistrate Judge Jeffrey Cole, however, denied that motion, holding that parties seeking native format production must explicitly demand that in their discovery requests. Because Chapman did not originally demand native format production (or even object to the paper production), she waived her right to native format production. According to Judge Cole, that the employer ultimately agreed to re-produce some documents in native format, even though it was not obligated to, “is the occasion not for sanctions but for some measure of commendation.”

As the Chapman case demonstrates, if a party wants access to native format documents, it must specify as much in its discovery requests. Otherwise, the responding party is under no obligation to produce documents in native format and will not be subject to sanctions for refusing to provide a second, native-format production.   

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Agreements Controlling Intellectual Property Rights

Once a business identifies that it has acquired intellectual property, business policies and conduct can make certain that ownership is retained. Executing employee contracts and policies (i.e. employee handbooks) may require that the employee assign his right to the intellectual property back to the business, or in certain cases that the employee keep any proprietary information confidential and and/or  disclose all creative ideas made during employment.

Some businesses fail to educate their employees about intellectual property. Even worse, some do not even establish contractual relationships with their employees or even inform them on company policies affecting the same. Ownership questions occur, and employees may even be able to assert ownership of the intellect property. Though the business may have a shop right, it is better to avert a situation of uncertain ownership. Even with contacts in place, a business should establish and explain its intellectual property policies to its employees.

1. Assignment Provision

For patents, an inventor owns all rights to an invention. However, if the inventor is an employee, an employer may lay claim to the invention under certain circumstances. For instance, if an employee is hired to invent and the employer can demonstrate that this was clearly spelled out for the employee, the employer will be deemed the owner of any invention within the scope of the employee’s employment. The mere existence of an employer-employee relationship does not of itself entitle the employer to an assignment of any inventions which the employee devises during the employment. The employee may not have to assign rights over to the business, but rather control the right under self-ownership. Therefore, it is important that any business provide an employment handbooks and/or agreements with assignment provisions, in order to avert unintentional ownership issues.

2. Nondisclosure Agreements

A nondisclosure agreement is a contract in which the contractual parties promise to protect the confidentiality of secret information or company know-how that is disclosed. This type of agreement may be made between two parties during a business transaction, or between an employer and employee. These agreements can be mutual agreements (two-way), where both parties are obligated to maintain secrecy (i.e business negotiations), or they can be unilateral agreements (one-way), where only the receiving party becomes obligated to maintain secrecy (i.e. employee contract). A nondisclosure agreement can be used to protect any type of information that is not generally known, and probably one of the best ways to maintain proprietary, confidential information.

3. Non-compete Agreements

Non-compete agreements can protect a business from losing valuable trade secrets and employees who develop intellectual property. The agreements act as a written promise by an employee not to compete with the employer, or take employment to a competing business. AA non-compete agreement is either a separate agreement or clause in an employment contract, and applies to confidential information related to the business of the employer.

Although non-compete agreement can sometimes be difficult to enforce, since they may be viewed as restraining an individual’s right to employment, a properly structured agreement that imposes reasonable time and geographic restrictions, averts the possibility of losing confidential information. 

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Intellectual Property is Still Property

Intellectual property, like real property, can be bought, sold, licensed, exchanged, or given away like other forms of property.   Proficient management of intellectual property rights becomes profitable if strategic techniques are utilized. The owner of intellectual property rights has the right to prevent the unauthorized use or sale of that property. As a result, it may strategic to assign or license these rights to exploit business profits.

There are essentially two ways to convey intellectual property rights: through assignment or license.  In relation to real property, assignments and licenses are the functional equivalent of a "sale" and "lease", respectively. 

Assignments

Law allows a transfer or sale of intellectual property rights, which may be partial or entire interests in the intellectual property.  An assignment of a patent, for example, is a transfer of sufficient rights so that the recipient has title to the patent. The assignee, when the rights are assigned to him or her, becomes the owner of the rights and has the same rights that the original owner. A business may never want to use a certain intellectual property rights (i.e. uncommon marketplace, little capital). However, that business may strategically exploit the intellectual property right through an assignment. Once the business transfers the rights to a third party, all rights are then reserved with the third party and exhausted within the assignor. 

Licensing

A license is written authorization to use owned intellectual property rights. Typically, a business will make arrangements to license its intellectual property rights, authorizing a third party to use those rights in exchange for valuable consideration. However, unlike assignments, the owner retains the ownership of those rights, and can contract for a running rate of payments.

The license allows another to use an intellectual property right within a defined time, context, market line, or territory. A license may be exclusive or non-exclusive, and run longer or shorter than the duration of the intellectual property protection, prescribed by law. 

Licensing provides a means for an owner of intellectual property to exploit markets which may not otherwise have been available.   As a contractual agreement, the terms of the agreement can be tailored to recoup part of the expenditure incurred during development while also tailored to maintain a running stream of revenue from future profits. Although there is always uncertainties in the marketplace, a license may have a larger upside than a single assignment of rights. 

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Monitoring and Identifying Existing and New Intellectual Property

With respect to an economy, intellectual property rights create value in business products and/or services. Furthermore, intellectual property rights allow a business to distinguish their goods and services amongst competitors. An owner may exploit these rights and its value in the marketplace. For instance, a patent owner holds a significant advantage against competitors and a clear advantage in market utilization, since the patent owner can enforce patent rights against those competitors. As a result, any business should evaluate the potential value of their intellectual property, as a potential right to secure, and then enforce against others.

Ignorance or neglect of intellectual property rights can present inherent dangers to any business. For instance, a business may fail to take full advantage of those assets or fully appreciate the actions of their competitors. Unfortunately, many businesses often overlook the real potential of intellectual property. Even worse is the situation where a business fails to monitor and police rights that they already have. Even though the government gives intellectual property owners rights, it is up to the owner to police or enforce these rights. 

A business that is alert and aware of its intellectual property may generate many business opportunities, and in return that business may avoid expensive problems. Implementing an intellectual property protection policy would require the identification and protection of intellectual property rights that the business may already possess, which may include patents, trademarks, copyrights, trade secrets and trade dress. 

Logically, it is desirable to protect every particular piece of intellectual property that a business owns. However, that may not be economically feasible. Rather, a business should perform a cost-benefit analysis to determine whether securing and maintaining intellectual property protection is necessary. Even if a business does not have a marketplace for that intellectual property, secured rights can be sold or rented like real property. 

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The laws protecting intellectual property rights are tools of economic policy. The United States intellectual property system is a crucial part of our country’s economic infrastructure, since these rights strengthen owner assets, while also advancing technology in common related fields of technology. For instance, an inventor receives an exclusive right to exclude others from making, using, offering or selling a patented invention, as long as the inventor teaches all aspects of his invention within the patent application. As a result, the U.S. patent system fosters innovation by utilizing a quid pro quo, where another inventor can take those teachings and further develop new technology.

Patent Reform

For the past several years, Congress has a revived interest in revising the patent system. This will not be the first change, nor will it be the last. Regardless, any sort of change should have an effect on businesses and industry in the United States, if not the world.

The most notable proposed change is a switch from a first-to-invent priority system to a first-to-file system.   This change would be in harmony with the most of the patent systems employed around the world. Although opponents assert that the change would bring a backlog of applications, proponents feel the change may stimulate technology at a faster pace. 

Other notable changes include, but are not limited to: (1) a failure to fulfill the best mode requirement would no longer be an invalidity defense nor could it serve as a basis for holding a patent unenforceable, (2) a requirement that a court "identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination", and (3) a statutory definition of "willful infringement" clearly affirming that "knowledge alone" is not sufficient for a finding of willful infringement (allowing a court to increase the damages up to three times the amount found or assessed).

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