Sunday, March 21, 2010

Trade secrets: Do You Own What You Think You Own?

By John L. Watkins

A recent case involving a dispute between the famous Mayo Clinic and a former employee, a physician, has been in the legal news. Mayo and Dr. Peter Elkin are battling about who owns the rights to a software program that Dr. Elkin participated in developing. According to a report from The National Law Journal, the case is headed to trial after the trial court denied summary judgment to both parties.

The software in issue helps manage medical information and puts it in a clear and understandable format. According to a report in the Pittsburgh Tribune-Review, both sides agree that the software has great economic value.

Delving into the merits of the Mayo/Elkin dispute is beyond the scope of this post. The nature of the dispute, however, raises a fundamental question that often rears its head in trade secret, copyright and other intellectual property litigation: Do you own what you think you own?

The vision of recent college graduates (or dropouts) writing software or developing other technology in a storefront office or a garage is a modern variant of the American Dream of rising from rags to riches. Such efforts are not necessarily mere pipe dreams. In fact, modern technology and decreasing barriers to entry probably make it more possible than ever for an entrepreneur to achieve at least a modicum of financial success, if not becoming the next billionaire.

In many instances, friends will work together in developing technology or another invention. Sometimes, entrepreneurs will “partner” with another company for a particular purpose. In some instances, an investor will come into the mix. In each instance, if intellectual property rights are not documented properly, the possibility of a future dispute becomes very real.

Further, the possibility of a future dispute or lawsuit increases in direct proportion to the success of the venture. Put more bluntly, it is not likely that anyone will fight over worthless technology. It is very likely, however, that disputes will develop over valuable technology, as shown by the dispute between Mayo Clinic and Dr. Elkin.

When inventors or entrepreneurs believe they have developed, invented or written something valuable, it is critically important to consult an experienced attorney before entering into any relationship with a third-party business “partner” or an investor. It is equally important that persons working together document their respective rights and obligations regarding the technology, writing or invention.

This is definitely not a situation where inventors, entrepreneurs or investors should try to go it alone or use Internet forms. Prospective clients should also not assume that every lawyer has the necessary experience or expertise to prepare proper documentation.

When the documentation is not properly prepared, the resulting litigation can, from a lawyer’s standpoint, be very interesting. The litigation will certainly be very expensive. At this point, however, the client is surely kicking himself for not having documented things properly on the front end.

This all boils down to yet another example of what readers of this blog will recognize as the Prime Directive: It costs far less to deal with a legal problem on the front end than trying to sort things out on the back end, particularly through litigation. The Prime Directive is especially important when dealing with any form of intellectual property.

1 comment:

  1. John,

    I completely agree about the Prime Directive. However, all too often entrepreneurs are hesitant to contact an attorney early on. The reason? They see attorneys as a cost, not a value add service.

    It's great that you are making the case for early representation.

    I have written about how lawyers can add value to client.

    Douglas Park