Perpetual Innovation

Category: IP

  • Is Trade Secret a Good Strategy? A Trade Secret Assessment

    Is Trade Secret a Good Strategy? A Trade Secret Assessment

    The most widely identified Trade Secret is, of course, Coke Cola. (The original formula included caffeine and cocaine – thus the name – but that is a different discussion!) In 1903, cocaine was removed, leaving caffeine as the sole stimulant ingredient, and all medicinal claims were dropped. But the Coke-a-Cola trade secret lives on. Sections below: 

    Most Widely Acknowledged Trade Secrets

    Other trade secrets include WD-40, Thomas’s English Muffins, the Google search algorithm, Listerine, Mrs. Field’s Chocolate Chip Cookies, Kentucky Fried Chicken, Big Mac special sauce, Bush’s Baked Beans, and the New York Times Bestseller List algorithm. 

    When you look at Strategic Business Planning Company’s Perpetual Innovation™ series of books, you will find descriptions of Trade Secrets and when they might be best utilized. In many cases, trade secrets that are ultimately released in commercial products are more advertising gimmicks than true secrets. Someone with a refined pallet, and a spectrometer, can identify all the elements that go into a bottle of Coke, for example. In which case, the copyrights © and Trademarks ® are more important than the (open) secret. We have had clients that wanted to use Intellectual Property (IP) protection for food products and consumer electronics. In both cases, the secret would be out there for an industrious competitor to reverse engineer once the product is launched. An “outed” secret in a competitor’s hands! A ruthless competitor could utilize all the powers of Intellectual Property against you, and all the powers of unethical business (like knock-offs) as well. 

    Probably the best trade secret is related to internal manufacturing where the finished product gives no evidence as to the innovation that yields a competitive advantage. In fact, we have had clients who patent an internal manufacturing process but have no way of determining if competitors adopt the technique inside their factories. The patent application tells them how to improve their processes. Our advice might have been to keep this invention internal as a trade secret. However, once the patent application was filed (published really), the next best approach was to manufacture and sell the new machines that capitalized on the invention. Everyone in the industry needed to upgrade to realize the production improvement.

    Our Trade Secrets Assessment Tool

    SBP has a Short Trade Secret Checklist and a regular checklist to see if new technology should be considered for protection as a Trade Secret. Here is the short form (with only 6 of the original 11 questions).

    As well, here is the interpretation of the checklist assessment in this Short Form example; the score was 4.8 (out of 10). The Longer Form (not shown here) for this same business case was slightly higher at 5.1, up slightly from a low to a medium trade secret position.
    If a trade secret is the decision for IP protection, then you will want to develop a Trade Secret Plan. The plan will include how to protect the secret by limiting who knows the secret, confidentiality agreements, etc. The Trade Secret Plan will also address what happens when the secret is exposed. Note the when, not if, here. There might be circumstances where you would expose the secret yourself, maybe in the disclosure associated with a patent application.

    #TradeSecret #IntellectualProperty 
    #IntellZine #IPplan #SBPlan

    Uniform Trade Secrets Act (UTSA)

    This is from the UTSA (with 1985 Amendments):

    The USTA (Uniform Trade Secrets Act) “trade secret” (UTSA § 1.4) “means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

    The UTSA also provided refinement through comments to the definition of a trade secret itself:

    • Multiple parties may hold rights to the same trade secret, as they may all individually derive value from it.
    • A trade secret ceases to exist when it is common knowledge within the community in which it is profitable. This means that the secret does not need to be known by the general public, but only throughout the industry that stands to profit from it.
    • A party that reverse engineers a trade secret may also obtain trade secret protection for their knowledge, provided the reverse engineering process is non-trivial.
    • Knowledge preventing loss of funds, such as that a particular idea does not work, is valuable and as such qualifies for trade secret protection.

    Regarding reasonable efforts to maintain secrecy, the UTSA maintained that actions such as restricting access to a “need-to-know basis” and informing employees that the information is secret met the criteria for reasonable efforts. The UTSA stated that the courts do not require procedures to protect against “flagrant industrial espionage” were not necessary.(Uniform Trade Secrets Act with 1985 Amendments”. Retrieved 2020-04-19.)

    Remedies. The UTSA provided for several potential remedies for wrongs committed under the act, including injunctive relief, damages, and attorney’s fees.

  • Delinkage and the Patent System for Pharma: Trouble Ahead?

    While the term “delinkage” has been around since at least 2005, it is not seen or heard very often.  It is the term used in the biomedical field by lawyers and politicians to mean a new way of funding drug R&D such that the patent system could be replaced with the result that a drug monopoly would not exist and drug prices would be significantly lower.  One of the advocates of this is Presidential candidate Bernie Sanders submitted the Medical Innovation Prize Fund as legislation in 2017 that would deny monopoly rights to pharma innovators and create a government fund.

    Delinkage is discussed in a Patent Strategy article Delinkage embraced innational elections as alternative to patents (ManagingIP, C. Kilpatrick, Nov. 14, 2019)  The article notes that in 2017 prescription drug spending was $334B and that US national healthcare spending was 17.9% of GDP.  That’s right, the US GDP, which is now at $20T devotes 18% toward healthcare! That’s approaching $4T when all healthcare from all sources are included! The high price of drugs is a big part of the escalation. Anecdotes and reports abound of grossly high prices for a drug and patients who go without needed medication because they cannot afford it.

    “We cannot control costs, reduce access barriers and protect and enhance innovation unless we change the way we finance biomedical R&D.  Delinkage is a radical and transformative approach to bring policy coherence to objectives regarding access, innovation and cost control.”  (Knowledge, Ecology International, Delinkage.org)

    The fact that this has been floating around since 2005 is proof positive that there is not a lot of momentum behind it.  Fundamental questions abound about how, how to, what if, where would the money to fund multiple projects over multiple years come from?  What if it doesn’t work?  Who pays?  What would the impact on the patent system — defined in the US Constitution — be?  There are international implications for patents so how would delinkage work globally?  What happens to the patent system if biomedical is carved out?  Is this a slippery slope, domino effect?
    At the risk of getting way out in front of our headlights, here is a possible middle road for consideration.  Keep the existing patent system as is or improved, allow the pharma company to obtain funding (much of it comes from the federal government anyway, including FDA, DARPA, Health and Human Services, etc.).  When the drug is approved for a market, the patent(s) is(are) treated like a Standards patents.  That is, it must be licensed to any and all, with a standard royalty rate, with all appropriate terms and conditions.  Multiple providers should result in reduced prices. 
    How do we control costs while protecting innovation? Delinkage might be a possible solution in Pharma.

    Non-Sustainable Healthcare Costs Revisited
    It is important to note the projection that Hall and Knab identified in a 2012 article related to healthcare costs in the US. Healthcare costs in the US had increased from 6% of GDP a few decades ago. Healthcare costs for several decades had increased by about 10% per year. During the Great Recession, this run-away healthcare costs has reduced to 4% or 5% per year, but still double or triple the rate of inflation. Some of the calming of combined healthcare costs can be attributed to many drug patents expiring, to the great recession, and to Obama Care (especially the early years of ACA).
    So, here is the trick question. If health care inflation rises back up to 10% per year, GDP growth is at 2.5% and general inflation is 2%, how many years before combined healthcare costs exceed the US GDP? Obviously, the out-of-control healthcare costs is not sustainable, but this question helps to put it all into focus. Answer: In the described case, it would take less than 24 years before healthcare costs exceeded the US GDP!.  For healthcare to increase to 50% of the US DGP would take only about 14 years.

    This out-of-control costs is horribly unacceptable. It is an unsustainable and compounding problem. Plus, the US spends more on healthcare (pre capita) than any other country, and generally has worse results!

    So, we are back to the question, what can be done here in addressing this problem? Ignoring the problem, and even adding to it, like the federal deficit, has an ugly way of coming back and biting us in the hinny.

    Maybe there’s something to the delinkage approach that can work for (almost) everyone and make a difference in bending the healthcare costs curve?

    Just to be clear, we at IPZine love innovation, we fully respect and believe in Intellectual Property, and we like capitalism – especially in places where it is sustainable and doesn’t create unmaintainable results.

    Delinkage has interesting possibilities.
    Reference
    Hall, E. B., & Knab, E. F. (2012, July). Social irresponsibility provides opportunity for the win-win-win of Sustainable Leadership. In C. A. Lentz (Ed.), The refractive thinker: Vol. 7. Social responsibility (pp. 197-220). Las Vegas, NV: The Refractive Thinker® Press. ISBN: 978-0-9840054-2-0

  • Potatoes and Patents

    Patents, Potatoes and Pomegranates 
    “I remember thinking- there cannot be anything clever in delivering beans…”  That was the reaction of Lucy Wojcik in 2014 being interviewed for the job of IP attorney at Ocado, an online supermarket company in the United Kingdom.
    It does furrow eyebrows when considering the part, if any, IP would play in a company that grows vegetables and fruits and then distributes them as meals, but now Ms Wojcik has a decidedly different view, https://patentstrategy.managingip.com/Articles/110?from=daily.  As she came to find out even in the supermarket business, “… as soon as you have problems that need solutions and engineers, you are generating IP.”
    The Ocado and its emphasis on IP serves as today’s model of how to maintain a competitive presence today and tomorrow.  With very few exceptions, a company today needs a strong R&D/IP culture to survive.  It must be an integral of the conduct of business, a primary consideration in company strategic planning.  It should be the source of new, competitive products and services as well as the mechanisms for protecting those products from competitive inroads.  A comprehensive tour de force for the “how to” is Perpetual Innovation™ A guide to Strategic Planning. Patent Commercialization and Enduring Competitive Advantage by Hall & Hinkelman available at Amazon and Lulu.
    Perpetual innovation™ Patent Guide & Patent Primer: http://www.lulu.com/spotlight/SBPlan

  • PetroCoins, Oil Sands Extraction and Blockchain.

    Oil sands are seriously back in play with patented technology. Combine that with blockchain tech, and you have an investment that you simply gotta get into, or not!…
    Petrotech Energy Inc. is touting both patents and blockchain in a penny, over-the-counter, stock (PQEFF).
    Well, maybe not investing, but here is a hyped-up “sponsored” Ad that looks slightly like an article over at OilPrice.com: https://oilprice.com/Energy/Energy-General/This-New-Technology-Could-Transform-The-Oil-Industry1.html
    Two things that are interesting in the penny stock that’s now up to $1.50 level. It has patented tech on oil sands extraction that is a closed loop system that sounds interesting. With the dry sands of Utah it apparently has the ability to extract 99% of the heavy oil and leaves only sand as the byproduct. That is pretty cool because oil sand extraction has historically been a very, very dirty and expansive business. They want to expand their patents to the countries where lots of (dry) oil sands deposits live and make a fortune. Unfortunately, two of the biggest candidates are Kazakhstan, Venezuela, Russia and China — not exactly the worlds heaven of intellectual property (IP) protection countries.
    In fact, the bitcoin IP (ICO) backed by oil reserves by Venezuela in an interesting ploy. We thought the initial coil offering should more aptly be called an IKO, for Initial Kleptocurrency Offering.
    A cybercurrency like bitcoin is, however, an interesting way to do business in any world, especially a kleptocratic country. And blockchain is the underlying transaction technology. So the marriage of blockchain to this company has real merit (they call their technology PetroBLOQ). However, bitcoin and blockchain technology are publicly available — open source — technologies.
    Petrotech says that they can produce oil at $22 per barrel. Maybe even as low as $18. That’s impressive for oil sands. Transportation and the extra costs of processing heavy (“dirty” vs “sweet” West Texas type crude) change that dynamic some; but still impressive.
    What’s somewhat funny is this statement: “It extracts over 99 percent of all hydrocarbons in the sand, generates zero greenhouse gases and doesn’t require high temperatures or pressures.”
    Generates “zero greenhouse gases”? It has to be transported, refined, transported to the pump and then burned in a vehicle where it produces between 19 and 20 pounds of carbon dioxide per gallon, depending on the type of gas/diesel.
    Yes, more green than the tar sands of Alberta, but certainly not as green as wind or solar. 
    Look, as well, at the trillions of barrels of oil in sands around the world. Even if we could extract it all and burn it, does not mean we should burn it.
    Check out a sister blog on the scenarios associated with the demise of oil (excluding any discussion about greenhouse gas issues).


  • ARM Holdings is giving up their "holding" to Sprint/SoftBank

    ARM Holdings, the maker of chips and chip making technology has week a favorite here at IPZine. They are basically an IP company holding lots of patents on lots of stuff. They specialize in energy-efficient, reduced instruction set (RISC) chip technology; build it and then license it out to chip makers.
    They have really taken off into the work of the Internet of Things.
    Today SoftBank (parent of Sprint) has offered to by ARMH in an all cash bid. The stock is up 50% today. Even at this elevated price, the price-to-earnings ratio is 70!. Compare that to Intel (INTC) with a paltry PE of 15. Profit margin of 35% vs 20% for INTC.
    ARM has remained independent and resisted the various take-over pressures. Until now. This changes somewhat the ARM dynamic of licensing tech to multiple players and making lots of money from licensing revenues (nearly pure profit). ARM has focused on tools and R&D and left the heavy work of manufacturing, distribution, etc. to their clients.
    This is probably a good time to start getting out of the stock; SoftBand (Sprint) is not nearly the same type of investment. Sprint is more of a utility play, not R&D.
    The drop in British Pound has made ARMH a far better deal to acquire. (ARMH is UK based.)
    On a separate note, SoftBank’s interests in buying up chip makers might become more complicated with ARM Holdings, in the company’s holdings.
    In the end, the independence of ARM Holdings didn’t hold.