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GlobaLinks Inc. (GLI) is a multinational hitech conglomerate with various subsidiary operations. A number of situations have arisen and GLI consult you about the Intellectual Property implications. All questions must be answered.
(1) GLI’s subsidiary, SoftWear Ltd. (SWL) write computer softwear and technical manuals. SWL employs its own programmmes directly as well as sub-contracting some work to outside agencies such as UniSoft & Sons (USS) a partnership of specialised programmers. GLI has instructed SWL to write a system programme for a new programmable, cashless, cash-card code-named “Plassis Cash Card” (“PCC”) which they estimate will cost at least $3 million to develop. So far SWL’s top programmer Alfie Hacker (AH) with a team of programmers has written the algorithm and preparatory documents for the master program code-named “Big Bucks”. Alfie engaged USS to write an applications program for the cards code-nemed “Plastic Bucks”. USS completed the Plastic Bucks program three months ago and they have been paid $450,000 for their work. As part of the development programme GLI arranged to use one of their main-frame computers called ‘SuperCruncher’, programmed by Alfie Hacker’s team to produce encrypted codes for the individual cash-cards. The resulting codes produced by SuperCruncher are called “PCCPinCodes”. GLI’s accountant, Ms Binomary, with SWL’s Managing Director, Mr. Fastlane, come to see you for legal advice concerning the Intellectual Property implications of the following situations:-
(i) Alfie Hacker has left SWL taking half the team of programmers with him. Mr. Fastlane suspects that they were ‘poached’ or head-hunted because they now appear to be working for Mega Bank Inc. (MBI )who have conventional credit cards but who, Mr.Fastlane has heard, are also working on cashless cards. Mr. Fastlane has also heard that USS are now doing work for MBI.
(ii) Mr.Fastlane wants to know if there is anything that can be done to stop MBI getting their hands on information about PCC, Big Bucks, Plastic Bucks, PCCPinCodes etc.?
(iii) Ms Binomary has a problem because the Inland Revenue are questioning the transfer of funds between SWL and GLI accusing GLI of transfer pricing in order to move profits abroad. She wants to know if there is any way of justifying SWL paying money to GLI for IP rights, on what basis, for how long, etc. etc.?
The first problem in this section deals with the breach of confidence; this is an area of law that spans media, employment, privacy and protection of private data. The basic law in Intellectual Property concerns the divulgence of protectable information, which was dealt with in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd which is information that has the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. Examples of this type of information are; personal secrets ; commercial records ; trade secrets ; and government secrets . The types of information that could be classed as confidential information was set in Coco Engineers v Clark where it was decided that the doctrine of confidential information would only be successful if the breach were a case of sufficient gravity. Also if the information becomes public in any manner then it is no longer private as set in the case of Chantry Martin v Martin . It is also held that a person that receives confidential information, even if it is already known to them, is still under an obligation not to reveal this information .
The basic essentials of breach of confidence was set in Coco v Clark where it was held that the information must be capable of having the necessary element of confidentiality, that there exists a relationship that the communication was relied in such as manner to preclude confidentiality and that there is a risk of the information being used to cause damage. In relationship to these new inventions are capable of being information as set out in Coco v Clark, but are subject to the case of Carflow Products (UK) Ltd v Linwood Securities (Birmingham) Ltd and Others . In the Carflow Case it was held that if a party views a product/invention there can be no obligation of confidence; hence showings at technical shows/fairs, even private showings can cause the product to be in the public domain and no longer subject to an obligation of confidence. In this case there is the scenario of a contractor and employees therefore there is an obligation of confidence if the information warrants it. Therefore one must turn to the employment law case of Faccenda Chicken v Fowler where it was held that there were three types of information that is gained within employment. The first was general information which is not confidential. The second was stock in trade information which remains confidential during the term of employment and ceases at the end of this term. The third is sensitive information which cannot lose its designation of obligation of confidence, which includes trade secrets such as new inventions. This means even after employment is terminated there is a duty not to divulge this information; this equally applies to cases of employees and those who have contracted as a freelancer to complete a certain term of employment or a specific duty. This is a new breakthrough in technology and would be classed a trade secret as long as both parties knew of the confidentiality of the information. This was defined in the case of FSS Travel and Leisure Systems v Johnson where it was held that; protection cannot be given to an acquired skill, know-how but only to an identifiable and objective knowledge, i.e. a trade secret such as a new technique/invention. The distinction between the two categories must be assessed on the facts of the case; the extent that the information is already in the public domain; and the amount of damage that will be caused by the information being divulged. In this case it is obviously a new technology that is not available to the public and therefore a trade secret, i.e. it is not just a technique of the business. The information if taken to a competitor and divulged would cause serious damage to the company therefore it would most likely be held as a trade secret and therefore there would be an obligation of confidence even after the contract for USS finished, i.e. they were paid money for their confidentiality and service, and for the employees that left to join USS would be obliged not to divulge these secret. If the information was divulged to a competitor or made public there would be a breach of confidence
There is a defence to breach of confidentiality, which is the public interest defence; however this can only be used in extreme cases, such as unlawful acts by the employer. In the case of Berloff v Pressdam it was held that public interest was to be taken to mean threats to national security, breach of law, fraud, hazards to public health and safety and other grave circumstances. If an employer had committed any of these acts then the ex-employee was able to use all knowledge gained regardless. The case of Lion Laboratories v Evans it was held that if there was public interest in issue whether there is a viable media interest or whether the information to be divulged to other recipients, where the factors had to weighed in order to determine if there is a valid public interest defence. In this case there is no grave situation therefore there would be no public interest defence. In short this means that if the information about the new technology was divulged by the employees of USS there would be a high possibility of a successful case in breach of confidence.
In order to gain an injunction against USS and the former employees it is very hard to gain. Injunction cases revolve on specific facts. An injunction is a discretionary relief and may only be awarded if the confidential information can be identified with some precision . Yet this does not mean that an injunction will be granted , which was based on the decision that the Shelter v City of London Electric Lighting Co where a injunction can be denied if; the injury to the claimant’s legal rights is small; if it is capable of being estimated in money; one adequately compensated by a small money payment; and it would oppressive to the defendant to grant an injunction. Therefore it would be hard to grant the injunction unless there is considerable financial damage, which there may be because of the loss of future profits.
The final aspect of this question deals with whether there can be a legal sale of Intellectual Property rights between subsidiaries. The answer is that it is possible because they are separate companies, as long as this invention remains as Intellectual Property and a trade secret or if it were eventually patented. If there is no patent this is only available until the secret becomes public. If a patent is gotten and a license is granted to the subsidiary it is the length of the patent, which is twenty years under UK law. Therefore for the new technology being capable as being sold or licensed as Intellectual Property it needs to be classed as either a trade secret or a patent; otherwise there is no Intellectual Property and therefore it simply cannot be sold, licensed etc.
In summary there would be a successful breach of confidence if information about the new technology was divulged by USS or the ex-employees. It is possible that an injunction may be granted to stop any information being divulged. Also as long as the new technology remains a trade secret or if it becomes patented then it can be sold/licensed as Intellectual Property.
GLI’s subsidiaries regularly patent inventions in a variety of fields. However, recently a number of problems have arisen. They consult you about the following situations:-
(i) SoftWear Ltd. (SWL) has invented a new system for displaying computer information on screen that they have called ‘Doors’. They want to know if they can patent it and how else they might protect the ideas.
(ii) SWL registered a very successful patent called ‘Fingercrucher’ for a computer which read fingerprints on cash-cards. Alfie Hacker (AH), a former employee, was the principal brains behind the invention. SWL is now in dispute with AH over a number of issues, but AH is insisting that he is the ‘joint inventor’ of Fingercruncher; that his name should appear on the patent; and that he is entitled to a share of the considerable profits. Has AH got any claim in law?
(iii) A subsidiary of GLI, Virgin Birth, wants to register a patent for pregnancy testing and ask you if it is possible since they heard that’ medical treatments’ cannot be patented.
(iv) High Speed Solutions (HSS) have previously made a fortune out of a patent for a social solution to clean sensitive surfaces such as CD-Roms, etc. which they sold under the brand-name “Slikcleen”. That patent has now expired but HSS has recently discovered that “Slikcleen” is also a super-conductor. It wants to know if it can apply for a new patent for this new claim to super-conductivity?
(v) Virgin Birth do research in the field of bio-technology and DNA. They think that they can now manipulate DNA from humans and elephants to produce students with photographic memories. They are calling the resulting animals “Humants” and wants to know if they can patent any part of the process. They heard that discoveries cannot be patented and wonder it this might affect their chances of getting a patent for their work.
(vi) SWL have invented a new computer language which they call ‘Ubiquitous’ and a compiler/interpreter which automatically translates it into machine code.
They tell you that they have already demonstrated these inventions to certain selected customers and at trade shows. SWL wants to know what the best way of protecting these inventions is.
As these inventions have been shown at selected trade shows and customers it is held in the public domain and will not be capable of being a trade secret therefore there can be no breach of confidence action or injunction created. Therefore there would have to be a reliance on patenting the invention. Computer hardware can be patented as long as the invention meets four criteria which are; it is novel; there is an innovative step; it is capable of industrial application; and it must be an invention. These criteria are found under the Patents Act of 1977 Section 1 and there are two types of patentable invention, which are product inventions and process inventions. Therefore as long as the process is hardware related it is patentable, if it is computer software related it is excluded from patentability and falls under copyright protection. There is an added problem that the showing of the inventions at trade shows may not only make the product free from obligation under breach of confidence, but if it is discernable how the product works that it is no longer novel and cannot be patented. However in the case of computer hardware circuitry within is not disclosed as long as it cannot be seen by the customers. Also under the Patents Act of 1977 Section 2(4) disclosures do not undermine patentability for a six month period in the following cases; the information was obtained unlawfully or through breach of confidence; the disclosure was from a display by the inventor as a prescribed international exhibition and proper notification was applied for.
Therefore as long as the computer system is hardware and fall under the three steps it is patentable as long as there is no indication of how the invention works if shown to selected customers and at trade shows. The best option is not to show an invention until the patent is granted and this way one can also use the protection provided to trade secrets under the breach of confidence law.
When an employee is the inventor, the rights normally belong to the employer if undertaken under the course of employment or in the course of duties and under an obligation to further the employer’s interests. This is contained within the Patents Act of 1977 section 39. This method for determining whether the employee is under an obligation to the employer was laid down in the Harris Patent Case where the court will determine if the invention was created in normal course of duties and if so then section b) would automatically be fulfilled. If not section b) will be considered and if there is any linkages between the inventions discovery and employment, i.e. using the employers time, materials etc then the patent would belong to the employer. If it falls outside this ambit then the employee holds rights. As this invention was obviously under the normal course of employment it would belong to the employer, especially in light of the GEC Avionics Ltd’s Patent which makes it very difficult for an employee working for a large scale employer to make a successful claim in favour of the employee.
Medical methods and techniques cannot be patented, but if there is a new product that is created, i.e. a drug or device that fulfils the three criteria of what is patentable then it is possible for a patent to be approved. However it is only the composition of the drug or device that is patentable the instructions are not. Therefore if the pregnancy testing is using the same components it is only the method of doing it that is different then it cannot be patented; however if the composition of the device has changed and is novel etc then this new form of pregnancy testing is patentable. That is unless the instructions are incorporated into the packaging in a novel manner then under the Organon Laboratories Ltd’s Application it is capable of being patented. Even if the device or drug has already been patented for another use and has been discovered to have a medical use it can be patented again for this medical use as per the Wyeth Case.
If an invention has already been patented for one use and it is discovered to have another use that falls under the steps of patentability then it is capable of being patented under this new use as per the Wyeth Case. Therefore as long as the requirements of a patent are fulfilled then the same invention can be patented as a super-conductor, i.e. as long as it was not already public knowledge of this other use and it is not easily discernable how this other use works by the product being the market already. Yet the product would only be protected on the grounds of super-conductivity and not a cleanser of CD-ROMs, which means that this use would be available to the public domain and a monopoly is not held.
In respect to the Humants process this would not be patentable on moral and ethical grounds. However this is controversial at the moment with the possibilities to medical science with DNA processes in animals and humans. The current law excludes them at the moment because of the dangers associated with such discoveries. Extreme eugenics poses the main ethical concern, where a super race is created and individuality is destroyed. It is this aim for the perfect human specimen which has caused genocide and the belief f superiority, when in fact according to human rights theory all persons are equal. It is the fear that any given gene that is seen as defective, even if it is a social dilemma such as hair colour, will result in the inferiority of some persons; whereas those perfect specimens become the super race. What will come next only allowing those with perfect genes to breed? It almost sounds like a cattle breeding programme. However in a mild form eugenics can help individuals to determine a method to have a happy child, which will not be afflicted by a debilitating disease. The next problem with eugenics, in its mild form, is whether it will be benefiting all persons or only those with the money, background or genes? At this point biological research is done by companies whose bottom line is profit, therefore will the poor be treated the same as the rich. This will cause the elite to create a super race and the poor to remain subjugated. “In a market society, notions of perfection will be sold. You can almost see the shops in the mall: Genes ‘R’ Us.” This could lead to human cloning; however at this point human cloning is a breach of international human rights law – something that will not happen soon, especially with the Frankenstein fear still implanted in society’s mind.
Another ethical problem is where is the line drawn between cure and enhancements? These enhancements will be the plastic surgery of the genome era; however will these create the problems that occurred in Nazi Germany, where the super race was blonde haired, blue eyed and tall? It is when one starts to diverge from cures, which benefit the whole human race to making an image of beauty and all follow is when it becomes very dangerous and individuality and biodiversity is eroded; as well as the notions of non-discrimination and tolerance:
Correcting obesity may be the first application of genetic therapy that falls in the grey zone between cure and enhancement. Nineteen obesity genes have already been identified. Is wanting to be thin a health concern or fashion statement.
The final case of the computer language, which is a software process as already noted would not be patentable but protected under copyright law; however it is important to mention that the proposed Directive on Software Patents would allow software, such as computer languages to be patentable.
- Bainbridge, 2002, Intellectual Property 5th Edition, Longman
- J. Naisbett, N. Naisbett & D. Philips (2001) High Touch, High Tech, London, Nicholas Brealey
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