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Download Schrader Electronics Presentation on Risk _ Litigation

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									IP Risk & Litigation
                                              Nicola Young
                                              Corporate Risk Manager

“We are a technology company; engineering, innovation and R&D are our
         Stephen Mc Clelland, MD, SEL

                                  1        Technology where it matters

    1. Quick Intro to SEL

    2. Contractual Risk Transfer (US)

    3. IP Litigation Management (US)

                       2      Technology where it matters
Schrader Electronics Overview
                        Headquarters - -
                         Headquarters               Carrickfergus,
                             Antrim,                 Carrickfergus,
                              Antrim,              Northern Ireland
                                                    Northern Ireland
                         Northern Ireland
                          Northern Ireland
 Rochester Hills,
  Rochester Hills,                                                            Tokyo,
    Michigan                                                  Trollhättan,     Tokyo,
     Michigan                                                  Trollhättan,   Japan

        Altavista,                                            Munich,
         Virginia                                             Germany
                               Glastonbury,                                    Seoul,
     Springfield,               Glastonbury,                                   Korea
      Springfield,               England                                        Korea
     Tennessee                    England

                                    Paris,                                    Shanghai,
                                     Paris,                                     China
                                     France                                      China
Schrader WW Locations
 Engineering / Manufacturing

                                               3          Technology where it matters
Schrader Electronics Overview
 1st Manufacturing + HQ - Antrim, NI        2nd Mfg - Carrickfergus, N. Ireland

      R&D Facility - Antrim, NI            NEW - 3rd Mfg - Springfield, Tennessee,

                                       4          Technology where it matters
Schrader Electronics Overview
RF Design Centre -       Customer support
Pontarlier, France       Rochester Hills, MI

                     5    Technology where it matters
                                            ISO TS16949
SEL Products
  Design and Manufacture of Automotive
  Electronics (core skills: sensor, ASIC,
  Embedded S/W and RF Design) some
  medical and industrial
  Global Market Leader in RTPMS and key
  Exporter - 75% Sales in US

  Top 100 NI company - Organic growth
   2008 Turnover $227 million USD

  Approx. 1000 Employees WW, R&D group
  of 100 Engineers and ASIC Designers and
  highly automated manufacturing process

  Over 300 WW patents/patent applications

                                       6        Technology where it matters
2. IP Contractual Risk Transfer (US)

Corporate Risk Manager
Manage strategic and operational risk to the organisation and minimise
   exposure of financial assets and exposure to legal liability

Perceived high risk areas you may wish to consider:
Litigation management, contractual obligations, business expansion,
     integration & M&A, Intellectual Capital and Product Compliance

                                              Technology where it matters
Uniform Commercial Code (UCC)
 IP Considerations involved in Buying/Selling Goods in the US market
    UCC is one of a number of acts designed to harmonise law on sales and
    commercial transactions It has been adopted in some form in all 50 United
    States (rewritten in state law - some variance, generally representative)

    It is possible to “contract out” of certain portions (in writing) or to contract
    more in – Lets consider examples of effective contractual risk transfer

    § 2-312. IP Indemnity related provisions

     – SELLER warrants goods delivered free of the rightful claim of
       infringement (indemnity - attorneys fees generally inc.)

     – BUYER that furnishes specifications to seller must hold seller harmless
       against any such claim (spec compliance)

    Automotive sector:
         Few customers + many suppliers = enormous (buyer) leverage

                                            8            Technology where it matters
OEM’s contractual risk transfer

  General Motors (General T&Cs revised Sep 2004)

      “Supplier must defend and indemnify GM and its customers for any [no rightful]
      IP infringement claim related to parts or services. Supplier expressly waives
      [i.e. no indemnity for supplier] any claim against GM that the infringement
      arises from compliance with GM’s specifications”

 CHRYSLER (Production Purchasing General T&Cs (84-806-1875, 1/2008))

      “Supplier must defend and indemnify Chrysler and its customers for any IP
      infringement claim resulting from use or sale of parts or services provided and
      must pay all expenses and fees of counsel incurred in defending such suits.
      No exception is stated where Chrysler is design responsible.”

                                         9          Technology where it matters
Component Suppliers

     Generally, under the UCC a component supplier will not be required to
     indemnify Buyer fully where it supplies only part of an infringing product

     Volkswagen Group of America Inc T&Cs of Purchase (Jul 31, 2008)
     “Supplier indemnifies VW even if it only supplies a portion of the

     Toyota Motor Eng & Manufacturing Inc North America T&Cs (April
     1,2008) Supplier will have proportional liability as mutually agreed
     upon or in the reasonable exercise of Toyota’s business judgement

                                    10         Technology where it matters
Notice requirement
   § 2-607 notice of claim/litigation; control

      Buyer must notify seller within a reasonable time after he receives
      notice of the litigation or be barred from any remedy over for liability
      established by the litigation.

      Seller may demand in writing that buyer turn over control of the
      litigation including settlement or else be barred from any remedy

      Applies to any obligation of a buyer to hold the seller harmless
      against infringement

                                     11          Technology where it matters
Recommended: Internal Procedures 1/3
   1. Educate/train for the US market with the UCC in mind

      Target: contract negotiators, business managers and any staff who can
      waive, modify or add to contract terms

      Reinforce: In the US many warranty clauses are standard but this is not true
      of IP clauses – Take care not to dismiss small changes!

      Consult counsel but avoid over-lawyering
       – Lawyers are a uniquely qualified and useful resource to help you
         understand and use the law effectively

       – Advice versus decision making – you need to understand both
         commercial and legal terms but ultimately you are responsible for the
         performance of your business…

      No business venture is without risk – but it should be manageable –only
      agree to things that are within your capabilities

                                      12          Technology where it matters
Recommended: Internal Procedures 2/3
   2. Negotiate Terms: Everything is negotiable!

       – Buyers can leverage better terms than the UCC

       – Sellers should anticipate this and worst case push back at least to
         the UCC

       – For intransigent customers objection letters may be an option

       – It’s a business deal! Seller may agree to more onerous
         indemnification terms if they can leverage a better business deal
           • Own the IP (valuable as an asset and as an affirmative defence
           • CAP the overall liability in the contract or exclude liquidated damages

                                      13          Technology where it matters
Recommended: Internal Procedures 3/3

  3. Review your T&Cs of Sale and Purchase for the US market

     – Always communicate your T&Cs to the other party!

     – Take care of other documents (e.g. POs and Invoices) which may
       incorporate (controlling/exclusionary) boilerplate terms

     – If you want your T&Cs to be unilaterally enforceable then a good
       start is to make them reasonable – can start by looking at
       something analogous to the UCC and being fair and consistent
       with what is done in the market

                                  14         Technology where it matters
Finally: IP Litigation Management (US)

Despite your best efforts you might still find yourself involved in
patent enforcement litigation as a defendant or by stepping in to
control the defence of a customer e.g. where you know the
technology better and so rate your chances of success as higher…

                                          Technology where it matters
US Litigation Process

  E-discovery; FRCP 26(a)(1)(B): “ESI” very invasive:
  Discoverable “documents” and “data compilations” include all “electronically
     stored information” (ESI) including instant messaging systems, sound
     recordings, data stored on PDAs, and proprietary database files

  THE PROCESS (Note – “rocket docket” (accelerated time to trial) jurisdictions)
    Receive the Complaint (preservation notice – duty to preserve data)
     – Interrogatories (written questions)
     – Document Production - Cannot selectively withhold
                    Attorney client privilege - Partial waiver for opinion
                    Protective Orders - opponent will most likely get docs
    Depositions (Questions by (often very assertive) opposing attorney)
    Expert opinions
    Markman Hearing (Interpretation of claim terms)
    Trial (Jury – non specialist)
     – Federal Circuit – may be almost automatic based on stakes in case

                                        16          Technology where it matters
Consider: Internal Processes
      Some considerations for controlling discovery & associated costs

       – host production of documents internally: control, track and
         manage document production (DRP/EDRP) – string search
       – review (contractual) confidentiality obligations before production
       – consider European privacy laws ref emails etc – your duty to your

      DRP – Data Retention Plan – must comply with legal standards
      requiring data retention but beyond that consider focusing on disaster
      recovery as much as is feasible to avoid being overburdened with non
      business relevant/critical documentation which is difficult to manage
      in Discovery
      EDRP – Electronic Discovery Response Plan (identify, collect, review
      and later produce relevant documents in the lawsuit that comply with

                                   17         Technology where it matters
Consider: Internal Processes
    Educate employees to mitigate exposure to Treble damages

    US Statute permits court to triple the amount of the actual/compensatory
      damages for willful conduct (infringement)

       KEY: Determining patent claim infringement calls for a legal opinion – you
       may consider that non legal employees should refrain from
        – giving (in writing) their opinion regarding a company patent or a third
          party (e.g. competitor) patent, since such an opinion may be used against
          the company in subsequent litigation involving the patent

        – extolling the importance of the third party patent including stating that one
          "uses" or "infringes" the patent, or statements like "this patent is a
          problem for us“

        – If employees have a concern with a patent it is appropriate to raise this
          with (patent) counsel who can advise on the scope of the claims and how
          that relates to the product in question

                                        18           Technology where it matters
Tips: Selecting and Managing Outside Counsel
    Choose a large enough firm so you can change personnel if needed

    Cost versus quality – there is an optimum!
     – Identify partner activities – needed for case strategy, case management
     – Identify associate activities – generally more current/active in the field
       (hourly rates differ - bills should reflect this)

     – Be careful of hidden costs
         • Select a firm with counsel admitted in the jurisdiction (removes a layer of
           (local) counsel) and buys knowledge of local (court) rules
         • If working with personnel across multiple geographic offices (e.g. 2 litigators in
           different offices) pay attention to duplicate costs (e.g. admin/paralegal) costs
           may not be your costs unless the difference in location is for your benefit –
           don’t be afraid to negotiate these costs
         • Agree costs BEFORE work commences (also with damages experts and
           expert witnesses as they can spiral quickly– KEY: no surprises!)
         • Continuously explore settlement options – Upfront: communication with
           counsel is KEY! – things change quickly in litigation

                         Manage Litigation - don’t let it manage you!

                                            19            Technology where it matters

 If you have any questions please feel free to contact
    me by email:

 Speaker: Nicola Young
 Role: Corporate Risk Manager,
 Schrader Electronics Ltd.

 BEng Hons Electrical & Electronic Engineering
 LLB Hons Law and Government

                                  20         Technology where it matters

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