Many companies have formed intellectual-property-sharing initiatives to further the COVID-19 relief effort. These joint efforts are laudable, but they also create risks of intellectual property disputes after the crisis ends.
In the wake of this unprecedented global crisis, numerous companies have formed intellectual-property-sharing initiatives to further the COVID-19 relief effort—most notably the COVID-19 Therapeutics Accelerator backed by the Bill & Melinda Gates Foundation and the contact-tracing initiative by mobile technology rivals. Other joint initiatives have formed to produce masks and other protective equipment. These efforts rely on rapid, fluid joint sharing and creation of intellectual property to meet urgent needs created by the COVID-19 crisis. These joint efforts to help the world are laudable. But they also create risks of intellectual property disputes after the crisis ends. To illustrate:
Imagine that multiple companies operating in similar markets with similar or complimentary products enter a joint initiative to share intellectual property for a specific purpose. Simultaneously, one of those companies (“Company A”) develops its own product for launch in its typical market (which is the same or similar to the other participants’ markets). After the joint initiative concludes, Company A launches its product (which was not part of the joint initiative). The other joint initiative participants see Company A’s product as similar to theirs and see in it aspects of the proprietary information they shared during the joint initiative. They then sue Company A for intellectual property claims (e.g., trade secret misappropriation or patent infringement). If Company A did not use any of the other joint initiative participants’ proprietary information to create the new product, it must prove this—which could present challenges. Even if Company A did use the other participants’ proprietary information, those participants must prove Company A did so in a way that exceeded what it was allowed to do. Thus, from all parties’ perspectives, there are issues that require proof best created by careful documentation from the joint initiative’s inception and throughout its duration.
These types of intellectual property disputes have arisen in other contexts. For example, in TargetSmart Holdings v. GHP Advisors, after a failed acquisition, the target sued a competitor and investment firm for allegedly using intellectual property shared during due diligence. 1:19CV00312 (D.D.C. June 28, 2018); see also Absorption Pharmaceuticals v. Reckitt Benckiser, No. 2:17-CV-12872 (MCA) (CLW) (D.N.J. Feb. 21, 2017) (after potential acquisition failed, target sued potential acquirer for misappropriation of trade secrets shared during purported due diligence). And in Polyzen v. Radiadyne, one party to a joint development agreement sued the other party for alleged patent infringement. No. 5:11-CV-662-D, 2016 WL 5360576 (E.D.N.C. Sept. 23, 2016), aff’d, 726 F. App’x 819 (Fed. Cir. 2018) (finding defendant was joint owner of patent under parties’ development agreement); see also Lucent Techs. v. Gateway, 543 F.3d 710 (Fed. Cir. 2008) (affirming judgment as matter of law to defendant in patent infringement case brought by joint development agreement counterparty).
While many companies are joining the Open COVID Pledge and agreeing to make their technology free for public use subject to a creative commons license, such a donation may not be advisable or feasible for all companies. And regardless, information sharing can lead to potential disputes. Saving the world is a worthy goal, but there is no reason to completely forgo protecting one’s own company in the process. Many disputes can be avoided or resolved by clear documentation of the joint venture process and how joint venture information is handled. Below are best practices that can be implemented quickly and easily from the beginning of the joint effort without burying it in extensive negotiations:
- Document that the sole, narrow purpose for which partner companies may use shared intellectual property is for COVID-19 relief pursuant to the shared program.
- Document what each party may or must do with any shared information after the program terminates (and consider requiring the return or destruction of sensitive materials).
- Require all program participants to enter a mutual non-disclosure agreement whereby they agree to keep confidential each participant’s trade secrets and confidential information, and use such information only within the program’s stated narrow purpose.
- Document which employees may access partners’ intellectual property pursuant to the COVID-19 relief program, and require partners to do the same.
- Require that employees allowed to access partners’ intellectual property pursuant to the COVID-19 relief program agree to use it solely for purposes of the program, and require partners to do the same.
- Inform employees involved in the joint program which information or data is trade secret, patented, copyrighted, or otherwise protected, and require them to seek approval from a designated manager before sharing it with partners.
- Keep records of all information shared or received pursuant to the shared program. If there are categories of information excluded from the shared program, specify those excluded categories in writing (ideally before the program begins).
- If there are any non-COVID-19 projects that could give rise to a later dispute with a program partner based on their shared intellectual property, create a screen between the employees working on that project and those with access to partners’ intellectual property shared pursuant to the COVID-19 program. Keep contemporaneous records of the independent development of the employees working on projects outside the joint effort.
- Enter a written agreement defining each party’s ownership and permissible uses of any intellectual property resulting from the joint venture. If doing so would be too time consuming in light of the joint venture’s purpose, enter a written agreement specifying that no ownership or use rights will accrue until a separate, later written agreement is entered defining such rights.
Diana Torres, Allison Buchner, Lauren Schweitzer and Maria Beltran are all members of Kirkland & Ellis LLP’s Intellectual Property Litigation group, which handles copyright, trademark, trade secret, and similar disputes.